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Author: 


Brown,  Harry  Gunnison 


Title: 


Comments  on  some 
current  criticisms  of  land 

Place: 

Columbia,  Mo. 

Date: 

[1 923] 


f5-^^^^^-^ 


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B^oMn,   Harry  Gminison 

Goioiaonts  on  some  ourrant  oritioisms  of  land- 
valu'i  Vexation  ...  by  Harry  Guimison  Brovm  ... 
Columbia,  Missouri,  Lucas  brothers,  rl^2-, 

p.  117-169 •  19  on. 

"Reprinted  from  £hiSj  xho  taxation  of  unearned 
incoajs." 


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LIBRARY 


School  of  Business 


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^rtjr.    LIBRARY 
■^^HOOL  OF  BUSINESS 

G)mments  on  Some  Current 

Criticisms  of  Land- Value 

Taxation 

Reprinted  from 
TffE  TAXATION  OF  UNEARNED  INCOMES 

by 
Harry  Gunnison  Brown 

Professor    of   Economics    in    the 

Uni-yiersity  of  Missouri  f^     ^>    1 


l-^D 


"It  is  in  this  careful  analysis  of  property  and  the  nature  of 
incomes  that  Professor  Brown  has  made  a  distinct  contribution  to 
the  much   befogged  subject  of  taxation.     ... 

"Professor  Brown  is  not  a  'radical,'  if  one  may  judge  by  his 
book.  On  the  contrary,  he  holds  up  to  scorn  the  halting  philosophy 
of  the  Socialist,  and  the  absurd  antics  of  the  Bolshevist  he  laughs 
out  of  court.  Rather  does  he  cling  to  the  strictly  American  con- 
ception of  private  property,  based  upon  the  idea  of  creation.  The 
conservation  of  this  right  of  private  property,  indeed,  is  the  motif 
of  the  book.  It  is  because  he  would  protect  and  encourage  the  right 
of  private  ownership  of  privately  created  wealth  that  he  would  lay 
the  greater  burden  of  taxation  upon  the  publicly  created  wealth. 

"The  elaboration  of  the  theme  is  thorough.  ...  It  is 
this  methodic  and  scientific  treatiFcnt  of  the  subject  that  will  arrest 
the  attention  of  the  careful  thinker  "  -^Los  Angeles  Times. 


LUCAS  BROTHERS 
Colu-^bia,  Mo. 


^c 


\ 


i,./^ 


After  a  while  they  came  to  the  place  where  five  roads  branched 
m  diflFerent  directions;    Dorothy  pointed  to  one,  and  said: 
"That's  it,  Shaggy  Man." 

"I'm  much  obliged,  miss,"  he  said,  and  started  along  another  road. 
"Not  that  one!"  she  cried;    "You're  going  wrong." 
He  stopped. 

"I  thought  you  said  that  other  was  the  road  to  Butterfield,"  said 
he,  running  his  fingers  through  his  shaggy  whiskers  in  a  puzzled 
way. 

"So  it  is." 

"But  I  don't  want  to  go  to  Butterfield,  miss." 
"You  don't?" 

"Of  course  not.  I  wanted  you  to  show  me  the  road,  so  I  shouldn't 
go  there  by  mistake." 

"Oh;    Where  do  you  want  to  go  to,  then?" 
"I'm  not  particular,  miss." 

— ^L.  Frank  Baum 
,-.  {The  Road  to  Ox) 


t— '' 


f 


l\ 


ra 

COMMENTS  ON  SOME  CURRENT  CRITICISMS^ 

11 
The  Single  Tax  as  a  Deterrent  to  Thrift! 

It  will  be  worth  while,  before  concluding  our  study,  to 
consider  some  of  the  recent  criticisms  levelled  against 
the  increased  taxation  of  land  values,  by  a  few  of  the 
most  widely  known  of  the  economists  who  oppose  that 
policy.  These  criticisms  are,  in  large  part,  directed, 
ostensibly,  against  the  "single  tax".  But  it  is  perfectly 
obvious  that  most  of  them  are  intended  to  apply  against 
any  considerable  increase  of  land  value  taxation,  even  if 
such  taxation  might  have  to  be  supplemented  by  other 
taxes  in  order  to  provide  sufficient  revenue  or  even  if 
certain  other  taxes,  such  as  inheritance  taxes,  were 
wanted  anyhow  for  the  effects  believed  likely  to  result 
from  them. 

In  his  elementary  text  for  high  schools,  entitled  Essen- 
tials of  Economics,^  Professor  Fred  Rogers  Fairchild 
says: 

"One  of  the  clearest  lessons  of  the  world's  economic  his- 
tory is  that  the  most  efficient  use  of  the  land  comes  when 

^^  ^Reprinted,  with  some  changes  and  considerable  additions,  from 
"The  Single-Tax  Complex  of  Some  Contemporary  Economists," 
published  in  the  Journal  of  Political  Economy  for  April,  1924.  The 
author  is  under  obligation  to  the  Chicago  University  Press  for  per- 
mission  to   reprint. 

'New  York  (American  Book  Co.),  1923,  pp.  525  and  526. 

(117) 


//! 


» 


r 


118 


The  Taxation  of  Unearned  Incomes 


^ 


Single  Tax  as  Deterrent  to  Thrift  1 


119 


it  is  in  the  hands  of  private  owners.  Governments  have 
proved  to  be  very  poor  landowners.  ...  To  obtain 
the  fullest  product  from  the  land  there  must  be  careful, 
painstaking,  intensive  cultivation.  The  individual  owner 
will  give  his  land  this  kind  of  cultivation.  It  belongs  to 
him.  All  that  he  does  to  improve  it  by  hard  labor  and 
'loving'  care,  all  that  he  spends  for  draining  and  fer- 
tilizing, are  for  his  own  gain  and  for  his  family.  He  will 
work  and  spend  to  improve  his  land,  and  the  crops  will 
increase  accordingly.  The  marvelous  results  of  the  care 
and  labor  of  small  landowners  in  increasing  the  fruitful- 
ness  of  the  land  are  to  be  seen  all  ovei  the  world.  Exactly 
the  opposite  has  come  from  government-owned  lands. 

"Now  the  land  is  the  final  source  of  all  the  wealth  that 
satisfies  our  wants  and  makes  life  possible  and  enjoyable. 
Anything  that  increases  the  product  of  the  land  is  a  bene- 
fit to  mankind.  Anything  that  would  reduce  the  produc- 
tivity of  the  land  would  be  a  world  calamity.  Therefore, 
in  spite  of  some  evils  resulting  from  the  private  ownership 
of  the  land,  we  conclude  that  a  change  to  government 
ownership  would  be  a  mistake* 

"A  change  which  is  vigorously  advocated  by  some 
people  is  known  as  the  single  tax.  The  final  goal  of  the 
*single-taxers'  is  a  tax  of  100  per  cent,  on  the  economic 
rent  of  the  land.  They  would  like  to  see  the  government 
take  away  from  the  landowners  the  entire  economic  rent. 
Since,  as  we  have  learned,  the  value  of  land  depends  on 
its  economic  rent,  this  would  be  equivalent  to  taking 
away  the  entire  value  of  the  land.  The  single  tax  is  ul- 
timately land  nationalisation.^" 

In  his  second  following  paragraph,  Professor  Fairchild 
goes  on  to  say  that  in  "its  extreme  form,  the  single  tax 

Italics  here  arc  the  present  writer's. 


I 


i 


is  open  to  the  objections  already  raised  agamst  land  na- 
tionalization.'' This  he  says  without  any  qualification 
whatever.  It  would  seem  clear,  therefore,  that  Professor 
Fairchild  really  believes  that  a  tax  of  100  per  cent,  on  the 
rental  value  of  land,  with  no  tax  at  all  upon  the  products 
of  labor  including  what  is  spent  for  draining  and  fer- 
tilizing land,  would  "reduce  the  productivity  of  the  land."* 
Or  else  Professor  Fairchild  understands  the  single  tax  to 
be — what  it  certainly  is  not  in  the  minds  of  its  most  in- 
telligent advocates — a  scheme  to  tax  the  value  of  drain- 
age, fertility,  etc.,  put  in  by,  or  dependent  for  main- 
tenance on,  the  individual  owner.  Professor  Fairchild's 
statement  that  this«  would  "reduce  the  productivity  of 
the  land"  must  mean,  if  it  means  anything,  that  people 
will  work  harder  and  produce  and  save  more  when  their 
taxes  are  proportional  to  their  productiveness  and  thrift 
than  when  their  taxes  are  so  proportioned  to  the  advan- 
tages of  the  sites  they  occupy  that  improvements  in  drain- 
age or  in  the  fertility  of  their  lands,  more  and  better 
buildings,  improved  machinery,  greater  productiveness, 
etc.,  will  not  at  all  increase  their  taxes.«  This  is  certainly 
the  interpretation  which  the  high-school  student,  if  he 
thought  about  the  matter,  would  be  obliged  to  put  on  the 
passage.  And  this  is  the  impression  which  the  high- 
school  teacher — often  untrained  in  economics  and  sup- 

*See  remarks  quoted  from  Professor  Fairchild  v>a  land  nationaliza- 
tion. 

'Land  nationalization,  but,  as  pointed  out  above,  he  tells  us  that 
loo  per  cent  single  tax  is  open  to  the  same  objections. 

•Professor  J.  E.  LeRossignol  in  his  recent  Economics  for  Everyman, 
New  York  (Holt),  1923,  p.  273,  discussing  the  single  tax,  says  that 
"public  ownership  of  land"  which  he  apparently  regards  as  the  same 
thing,  "would  interfere  seriously  with  the  improvement  of  land," 


I 


-VA. 


120 


The  Taxation  of  Unearned  Incomes 


posing  that  the  conclusions  stated  must  be  correct  since 
they  are  those  of  a  widely-known  professor  of  economics 
in  a  great  university — will  get.  Is  the  conclusion  a  true 
one? 

But  perhaps  Professor  Fairchild  is  troubled  by  the  fear 
that  no  one  would  want  to  hold  title  to  land  if  its  eco- 
nomic rent  were  taxed  100  per  cent.,  whereas  people  do 
want  to  own  it  when  the  land  is  taxed  much  less  as  now, 
but  every  building  or  improvement  out  upon  or  into  the 
land  is  also  taxed.  If  a  farmer  should  have  to  pay  a  site- 
value  or  bare-land-value  tax  of,  say,  $100  a  year,  rep- 
resenting the  full  rental  value  of  his  farm  not  counting 
buildings,  machinery,  growing  crops,  fruit  trees,  installed 
drainage,  maintained  fertility,  etc.,  he  would,  on  chis 
theory,  not  care  to  hold  title  to  the  land  upon  which  and 
into  which  all  these  improvements  were  put.  But  if, 
paying  a  much  smaller  tax  on  the  bare  land,  he  had  to 
pay  additional  taxes  for  each  of  these  improvements,  then 
he  would  be  very  anxious  to  hold  title,  even  if,  as  might 
easily  be  the  case  with  highly  improved  property,  his 
total  taxes  were  larger. 

Let  us  digress  a  moment  to  the  case  of  urban  land 
which,  for  the  purposes  of  the  present  argument,  is  anal- 
ogous. The  present  writer's  house  is  built  on  a  lot  tha 
net  rental  value  of  which  probably  does  not  exceed  $40  or 
$50  a  year.  Professor  Fairchild,  if  he  holds  to  the  theory 
under  discussion,  would  have  to  say  that  a  tax  of  that 
amount  would  destroy  the  incentive  to  ownership.  (He 
does  say  that  "the  single  tax  is  ultimately  land  nationali- 
zation.") The  owner's  actual  tax  on  house  and  lot  comes 
to  $70  or  $80.  The  house  is  half  stone  and  so  is  not 
removable.  Can  it  be  that  the  f  oner's  interest  in  his  home 
and  his  desire  to  hold  title  to  the  lot  on  which  it  is  built 


*  Single  Tax  as  Deterrent  to  Thrift  !  121 

would  be  less  if  the  lot  were  taxed  at  full  rental  value 
than  it  is  when  all  the  property  is  taxed?  Is  it  not  a 
reasonable  conclusion  that  men  would  want  title— even 
with  the  100  per  cent,  extreme  of  single  tax— to  the  land 
in  which  and  on  which  they  possessed  valuable  improve- 
ments, and  that  they  would  be  as  thrifty  and  as  eager 
to  make  such  improvements  if  their  taxes  were  not  in- 
creased because  of  them?^ 

But  let  us  turn  back  to  Professor  Fairchild's  discussion 
of  private  ownership  of  land  versus  nationalization,  in 

>  which  agricultural  land  seems  to  be  especially  referred 

to.  "The  individual  owner,"  he  says,  will  give  the  land 
"this  kind  of  cultivation  (careful,  painstaking,  intensive). 
It  belongs  to  him.  All  that  he  does  to  improve  it  by  hard 
labor  and  Moving'  care,  all  that  he  spend::  for  draining 
and  fertilizing,  are  for  his  own  gain  and  for  his  family." 
As  a  matter  of  fact,  under  existing  tax  laws,  "all  that 
he  does  to  improve  it  by  hard  labor  and  'loving'  care,  all 
that  he  spends  for  draining  and  fertilizing,"  are  not  "for 
his  own  gain  and  for  his  family."  The  more  the  owner 
improves  his  land  the  more  he  has  to  contribute  of  his 

^  income  to  the  state.    What  Professor  Fairchild  says- of 

the  present  system  in  his  desire  to  defend  it  against  land 
nationalization  (in  his  view  the  same  thing  as  100  per 
cent,  single  tax)  is  distinctly  not  true  of  the  present  sys- 
tem but  would  be  true  under  the  single  tax. 

One  wonders  whether  Professor  C.  C.  Plehn,  also  a 
specialist  in  taxation,  had  the  similar  view  which  a  pas- 

'Of  course  it  may  be  argued  that  the  more  people  are  taxed  the 
harder  they  will  feel  obliged  to  work.  Relieving  non-landowners  of 
some  of  their  taxes  might  then  enable  them  to  do  less.  But,  on  the 
same  principle,  taxing  some  landowners  more  might  make  them  do 
more  work. 


fc 


1 


122 


The  Taxation  of  Unearned  Incomes 


tic'Irnr^''  ''"'^'  *°  ''P'*''  **""  deveIop„,ent  of  the  par- 
ticular phenomenon  on  which  it  rests.    A  single  tax  of 
any  k,nd^  w.ll  tend  to  defeat  its  own  ends  by  SprSsing 
he  existence  of  the  phenomenon  which  gives  the  13 

urL^^^       '  "°^'  "'■  '""^  ^  "°P'  h«  i''  taxed.    Nat- 

that  involve  this  disagreeable  consequence.  The  ex- 
perience of  nations  which  has  led  them  to  divers^v  the 
forms  of  their  taxation  is,  therefore,  supported  by  ft  o^ 
retical  considerations."  ^ 

The  reference  to  Mexico,  considered  in  the  light  of  its 
on  e,,  ,pp,3,,  ^^  ^  ^„  ^^  ^^  indue  fve  proi' 

that  every  tax.  including  the  single  tax  on  land  values^ 
epressive.     But,  as  Professor  Viner  has  pointed  oj  '» 

ttat?  tax  on TanH  f  "  "  "°*  ^  ^"'^'='^"*  -iemonstration 
wLr  "^  "^   "''  ^""''^  '■^P^^*^  the  use  0/  land  " 

Whether  a  single  tax  on  land  rent  could  provide  all  the 

necessary  revenue  for  our  common  needs'   or  whitlSer 

Vh  cd.  New  York  (Macmillan),  1921    n    fig     r( 
*.  passage  ci.d,  B.  P.„,„»,  Jb  vU.l  lc,?„r.T.W 

^talics  arc  the  present  writer's.  i 

Loc.  cit. 

"In  his  recent  book  on  Public  Finance  fNew  Ynrt     a     .  I 

'924,  p.  379),  Professor  H.  L.  Lutz  IZs  ^TT  ^^^^^PP^^^n^-.      ! 
land  values  can  h*.  ,       /t  ^    suggest  that  a  tax  on 


Single  Tax  as  Deterrent  to  Thrift  ! 


123 


m 


there  may  not  be  special  reasons  for  levying  certain  other 
taxes  is  not  relevant  to  the  present  problem.  The  point  is 
that  if  a  100  per  cent,  tax  on  rent  should  he  sufficient  and  if 
it  should  be  the  only  or  "single"  tax  levied  (this  being,  ac- 
cording to  Professor  Fairchild,  the  same  thing  as  land 
nationalization),  then  indeed,  and  only  then,  would  all 
that  the  owner  of  land  might  do  "to  improve  it  by  hard 
labor  and  'loving'  care"  and  all  that  he  might  spend  "for 
draining  and  fertilizing"  be  "for  his  own  gain  and  for 
his  family." 

It  should  be  noted  that  Professor  Fairchild  (and  like- 
wise Professor  Plehn)  does  not  base  his  statement  upon 
any  alleged  impossibility  of  separately  assessing  land  and 
improvements.  Professor  E.  R.  A.  Seligman,  in  at- 
tempting to  make  good  the  contention  that  the  single  tax 
would  rest  more  heavily  on  agricultural  than  on  urban 
districts,  found  himself  compelled  to  note  the  arguments 
of  those  who  insist  that  the  owners  of  agricultural  land 
should  not  and  would  not  be  taxed  on  the  value  of  trees, 
fertility,  drainage,  and  other  such  elements  put  in  or 
maintained  by  their  own  efforts  and  investment  and 
that  the  single  tax  would,  therefore,  be  relatively  less 
burdensome  to  the  average  farmer  ♦ihan  the  present  tax 
system.  His  answer  was  that  it  is  impossible  tc  separate 
the  value  produced  by  the  awner  from  the  value  socially 
produced.     The  only  evidence  the  present  writer  could 

rent  shall  be  reasonably  large.  As  long  as  such  a  tax  leaves  to 
private  owners  any  considerable  fraction  of  economic  rent  it  is  non- 
sense to  complain  that  the  tax  "base"  is  too  "narrow"  to  yield 
adequate  revenue,  nor  is  it  a  well-taken  objecticm  to  heavy  land- 
value  taxation  that  under  its  operation  many  parcels  of  land  are 
surrendered  for  taxes  and  can  not  then  be  marketed  at  a  high  price. 
For  one  of  the  very  purposes  of  such  taxation  is  to  lower  the  salable 
value  of  land.    See  5  7  of  this  essay  (III). 


■■fei 


r 


124         The  Taxation  of  Unearned  Incomes 

find  adduced  for  this  statement  was  the  allegation"  that 
this  is  not  easy  to  do,  that  "it  is  quite  impossible  in  prac- 
tice, to  distinguish  improvements  on  the  land  from  im- 
provements in  the  land,"^^  and  the  statement  that  "no 
attempt  is  ever  made,  in  assessing  land  values,  to  dif- 
ferentiate between  the  two." 

Doubtless  such  differentiation  would  involve  difficulties. 
In  practice  there  might  be  considerable  variations  from 
the  ideal  of  accuracy.  But  even  with  noticeable  imper- 
fections of  assessment  it  is  possible  that,  by  seriously 
attempting  to  tax  land  values  rather  than  improvements, 
we  might  penalize  thrift  and  the  improvement  of  land 
very  much  less  than  we  now  do. 

An  unbiased  inquirer  would  not,  perhaps,  be  primarily 
concerned  with  listing  difficulties  as  arguments  against 
the  single  tax.  One  suspects  that  he  would  endeavor  first 
to  ascertain  what  economic  wnsequences  would  be  likely 
to  ensue  from  the  application  of  a  bare-land-value  tax, 
and  that  then,  if  these  consequences  seemed  desirable, 
he  would  be  anxious  to  know  whether  a  system  of  assess- 
ments approximately  meeting  the  need  could  not  pos- 
sibly be  devised.  It  seems  not  beyond  the  bounds  of  rea- 
son that  the  exercise  of  intelligence  in  cataloging  elements 
of  value  not  appreciably  dependent  upon  owners'  efforts, 
e.  g.,  situation,  slope,  freedom  from  rocks,  etc.,  together 
with  experience,  would  go  far  toward  the  eventual  secur- 
ing of  workable  differentiated  assessments  even  of  agri- 
cultural land.  To  settle  the  matter  in  the  negative  with 
an  obiter  dictum  or  with  a  statement  that  differentiation 


12] 


^Essays  in  Taxation^  9th  ed.    New  York  (Macmillan),  igu,  p.  77 
and  footnote  on  p.  91. 

"Professor  ScHgman's  phraseology  is  a  bit  confusing.  For  what 
is  wanted  is  to  differentiate  between  bare-land  values  on  the  one 
hand  and  improvement  values  of  any  sort  on  the  other  hand. 


"> 


Single  Tax  as  Deterrent  to  Thrift  ! 


125 


is  "quite  impossible"  and  that  "no  attempt  is  ever  made 
.  .  .  to  differentiate"  may  be  no  more  reasonable  than 
it  would  have  been  in  1890  or  in  1900  so  to  settle  the 
question  whether  travel  by  airplanes  would  ever  be  fea- 
sible. If,  indeed,  no  better  scheme  should  prove  possible 
of  application,  we  might  follow  a  suggestion  of  Professor 
Commons^*  and  reckon  the  value^**  of  bona  fide  agricultural 
land  which  is  kept  up  to  par  in  fertility,  as,  say,  one-half 
bare-land  value,  after  the  value  of  all  buildings,  planted 
trees,  etc.,  had  been  subtracted.  And  the  cost  of  installed 
drainage  and  othsr  permanent  improvements  might  sim- 
ilarly be  subtracted.  If  such  permanent  improvements 
are  likely  to  become,  in  time,  indistinguishable  from  the 
land,  they  could  be  regarded  as  being  amortized  into  bare- 
land  value^^  so  gradually — say  over  a  period  of  thirty  to 
fifty  years — as  not  seriously  to  discourage  the  owner 
from  making  them.  Then,  in  a  succeeding  generation, 
when  evidence  of  their  cost  was  no  longer  available,  the 
problem  of  assessment  would  not  be  complicated  by  them. 
Those  who  object  to  taxing  land  values  rather  than 
capital  on  the  supposition  that  the  distinction  frequently 
could  not  be  made  by  assessors  with  absolute  accuracy, 
perhaps  do  not  fully  realize  what  this  argument  implies. 
If  we  must,  sometimes,  because  of  the  inadequacy  of  our 
data  and  the  imperfections  of  our  judgment,   uninten- 

""A  Progressive  Tax  on  Bare-Land  Values,"  Political  Science 
Quarterly,  March,  1922,  especially  pp.  53-56.  Professor  Commons 
makes  other  interesting  suggestions  along  the  same  line.  Cf.  the 
present  book  {The  Taxation  of  Unearned  Incomes),  pp.  102-3,  foot- 
note. 

"It  would  be  well  to  reckon  by  rental  rather  than  by  salable 
value  since  the  latter,  in  the  case  of  land,  is  so  greatly  affected  by 
any  considerable  tax. 

"Cf.  Commons,  loc.  cit.,  pp.  61-64. 


126 


The  Taxation  of  Unearned  Incomes 


^ 


/ 


Is  Land  Speculation  Beneficial? 


127 


tionally  penalize  thrift  and  improvement,  is  it  therefore 
to  be  argued  that  ./e  ought  dehberately  to  maintain  a 
system  of  taxation  by  the  application  of  which  we  ahvays 
and  everywhere  penalize  thrift  and  improvement  ? 


§2 


Does  the  Community  Gain  from  Land  Speculation  f 

While  some  economists  seem  to  argue  that  to  levy  on 
land  values  rather  than  on  other  things  would  discourage 
the  improvement  of  land,  other  economists  (or,  at  least, 
one  other)  seem  to  fear  that  such  taxation  would  unduly 
interfere  with  the  holding  of  land  out  of  use  by  specula- 
tors !  In  the  words  of  a  well-known  opponent  of  increased 
land-value  taxation,  Professor  Richard  T.  Ely,^'  the  owner 
of  vacant  or  unused  land  "renders  distinct  service  because 
he  carries  the  burden  while  a  lower  use  is  ripening  into 
a  higher  one."  There  is  no  intention  to  argue  here  that 
all  land  ought  to  be  used  when  it  is  not  all  needed.^®  Nei- 
ther is  it  intended  to  deny  that  the  holding  of  well-situated 
land  out  of  use  for  a  few  years  may  sometimes  leave  the 
way  open  to  a  better  use,^®  that,  for  example,  speculation 
in  city  lots  may  yield  a  service  by  preventing  land  from 
being  built  on  too  soon  and  so  saving  it  for  prospective 
high  buildings  without  necessitating  the  tearing  down  of 

^'Outlines  of  Land  Economics,  Ann  Arbor,  Mich.  (Edwards  Broth- 
ers), 1922,  Vol.  Ill,  p.  105.    Cf.  also,  context,  p.  104. 

"Much  of  the  remainder  of  this  and  the  next  paragraph  is  repeated 
almost  word  for  word  from  the  footnote  on  page  106. 

"See  Fisher,  The  Nature  of  Capital  and  Income,  New  York  ( Mac- 
millan),  1906,  pp.  253-254.  The  present  writer  has  no  reason  to  be- 
lieve that  Professor  Fisher  opposes  increased  taxation  of  land  values. 


old  and  lower  ones.^®  But  if  any  economic  waste  is  ever 
so  avoided  it  is  probably  more  than  equalled  by  the  waste 
involved  in  constructing,  repairing  and  cleaning  longer 
streets,  in  the  walking  and  riding  longer  distances,  past 
vacant  land,  of  thousands  of  city  dwellers,  and  in  the 
transporting  of  goods  farther  from  store  to  store  and 
from  stores  to  homes  than  would  otherwise  be  necessary.*^ 
Individual  estimates  of  the  balance  of  gains  and  losses  do 
not  tend  to  result  in  the  most  economical  arrangements 
when  the  individual  who  exercises  the  power  of  choice 
experiences  the  gains  but  divides  with  the  community 
the  losses.  May  it  not  be  that  wastes  of  a  like  sort,  in- 
cluding the  building  of  railroads  past  many  miles  of 
largely  unused  land,  help  to  account  for  those  "high  costs 
of  distribution''  of  farm  products,  of  which  farmers  and 
others  frequently  complain  ? 

Again,  the  notion  that  money  can  be  made  by  specula- 
tion in  land  probably  operates  as  would  a  partial  combina- 
tion among  holders  of  vacant  land,  thus  forcing  up  rents 
and  land  prices.  Also,  such  unused  land  is  raised  in 
value  not  only  by  road  and  street  construction,  but  also 
by  other  improvements  and  services  paid  for  from  com- 
munity funds.  Hence,  to  tell  the  owners  of  land  that 
many  of  the  improvements  will  be  paid  for  chiefly  by 

"Everybody  knows  that,  as  a  rule,  skyscrapers  are  built  upon  land 
on  which  lower  buildings  previously  rested  and  that,  usually,  these 
lower  buildings  are  torn  down  in  order  that  the  higher  ones  may 
be  constructed.  And  there  are  persons  who  would  be  inclined  to 
say  that,  even  if  the  speculative  holding  of  land  out  of  use  really 
were  an  advantage  to  the  community,  the  leaving  of  the  major  part 
of  economic  rent  to  private  landowners  would  be  too  heavy  a  price 
to  pay  for  it. 

"In  so  far  as  space  may  be  wanted  for  parks  and  playgrounds, 
the  taxation  of  land  values  makes  it  possible  for  suc^  space  to  be 
bought  at  a  lower  price. 


fl 


128 


The  Taxation  of  Unearned  Incomes 


those  owners  who  build  upon  and  use  their  land  may  be 
not  merely  to  avoid  discouraging  speculative  holding  but 
to  offer  a  distinct  encouragement  to  such  holding. 

It  is  interesting  to  note  that  different  conservative  pro- 
fessional economists  answer  in  seemingly  opposite  ways 
the  contention  of  land- value  taxation  advocates  that  spec- 
ulation in  land  injures  the  community  by  holding  good 
land  out  of  use,  so  forcing  resort  to  poorer  land,  decreas- 
ing the  productivity  of  industry,  lowering  wages  and 
raising  land  rent.  For,  while  some  economists  make  light 
of  this  contention,  claiming  that  very  little  good  land 
really  is  held  out  of  use,  others  (at  least  one  other)  argue 
that  land  is  held  out  of  use  during  the  "ripening"  process, 
that  this  is  to  the  advantage  of  society  and  that  heavy 
land- value  taxation  is  objectionable  because  it  would  pre- 
vent such  holding.  Both  of  these  arguments  against  in- 
creased land-value  taxation  are  apparently  appealed  to  by 
Professor  Ely.^* 


§3 

The  Unearned  Increment  as  a  Cause  of  Cheap  Goods! 

A  view  which  should  perhaps  be  distinguished  from 
any  of  the  foregoing  ones  is  that  of  Professor  T.  S. 
Adams.  Professor  Adams  seems  to  believe  that  the  pri- 
vate receipt  of  the  so-called  unearned  increment  stimulates 
production  and  thereby  lowers  prices.  The  implication 
would  appear  to  be  that,  were  land  values  so  taxed  as 

''Oudincs  of  Land  Economics,  Vol.  Ill,  pp.  98,  io4,  105,  The 
chapter  here  cited  is  repeated,  in  large  part,  from  Professor  Ely's 
paper  in  the  Proceedings  of  the  National  Tax  Association  for  1921. 
See,  especially,  pp.  245  and  251. 


Unearned  Increment  /nd  Cheap  Goods!      129 

to  prevent  private  realization  of  any  unearned  increments, 
prices  would  be  higher.  Professor  Adams  says^*  that 
"farmers  and  farms  are  more  numerous,  farm  products 
more  plentiful,  and  farm  prices  lower,  because  of  the  un- 
earned increment.  ...  It  (the  unearned  increment) 
is  diffused  to  every  one  who  eats."  To  this  one  would 
be  inclined  to  reply  that  if  we  have  more  farmers,"  farms 
and  farm  products  and  lower  prices  of  these  products, 
then  we  must  have  fewer  people  in  some  or  all  other 
lines,  fewer  builders,  fewer  manufacturers,  fewer  houses, 
fewer  manufactured  goods  and  higher  rents  and  prices 
for  these  houses  and  goods. ^^  But  such  does  not  appear 
to  be  the  view  of  Professor  Adams !  For  he  goes  on  to 
say  :^® 

"Similarly  our  railroads  have  counted  upon  the  un- 
earned increment  to  justify  extensions  that  would  not 
otherwise  have  been  made ;  and  if  the  land  used  in  op- 
eration is  yielding  a  high  economic  rent,  that  rent  enters 
into  the  earnings  upon  which  traffic  rates  are  based.  Thus 
in  two  ways  the  unearned  increment  operates  to  reduce 
railway  rates.  .  .  .  The  manufacturer  in  the  same 
way  is  forced  to  give  back  to  the  community  the  unearned 
increment  which  he  is  supposed  to  receive.     .     .  Here 

the  consumer  of  the  product  gets  the  benefit  through  a  re- 
duction in  the  cost  of  production.     .     .     .     Finally,  ten- 

""Tax  Exemption  through  Tax  Capitalization,"  American  Eco- 
nomic  Review,  June,  191 6,  page  279. 

^We  might,  conceivably,  merely  have  the  same  number  of  farm- 
ers, but  settling  new  land  instead  of  remaining  on  the  old. 

**Sce  footnote  oh  pp.  163-165  of  this  book.  Cf.  II,  §  6,  where 
consideration  is  given  to  the  claim  that  the  unearned  increment  is 
diffused  in  higher  %vages. 

^Pagcs  279-280  of  his  article. 


II 


I 


r'l 


130 


The  Taxation  of  Unearned  Incomes 


ants  receive  the  transmuted  unearned  increment"  (in  the 
form  of  reduced  rents)  !" 

Unlike  those  who  contend  that,  because  of  the  hope  of 
an  unearned  increment,  good  land  is  held  out  of  use  and 
production  retarded  by  the  forcing  of  industry  to  poorer 
and  more  remote  land,  Professor  Adams  seems  to  believe 
that  there  are  more  people  in  every  line,  more  land  used, 
more  buildings  constructed  and  prices  and  house  rents 
lower  than  if  the  unearned  increment  were  not  allowed, 
to  go  into  private  hands !    The  number  of  persons  in  each 
line  is  increased  thereby  without  the  number  in  any  other 
line  being  decreased  !^®  Does  Professor  Adams  think  that 
the  private  enjoyment  of  the  unearned  increment  increases 
the  birth  rate  or  decreases  the  death  rate,  so  causing  more 
persons  to  crowd  into  all  lines  ?    And,  if  so,  does  he  sup- 
pose that  the  presence  of  this  larger  population  (per naps 
forced  to  the  use  of  poorer  land  by  speculative  holding  as 
well  as  by  increase  of  numbers)   will  result  in  greater 
prosperity  for  the  masses,  so  "diffusing"  the  unearned 
increment?    If  he  does  not  suppose  this,  then  what  does 
he  suppose? 

"Sec,  for  a  discussion  of  the  relation— or  non-relation— of  the  un- 
earned increment  and  building,  Davenport's  article  on  "Theoretical 
Issues  in  the  Single  Tax,"  American  Economic  Revieio,  March,  1917, 
pp.  17-24,  and  the  present  writer's  recent  book,  The  Economics  of 
Taxation,  New  York  (Holt),  1924,  pp.  225-227. 

"On  page  aSi  of  his  article  Professor  Adams  seems  to  admit  that 
if  the  increment  were  accurately  known  in  advance  It  would  be 
capitalized  and  that  then  lower  rents  and  prices  would  not  follow. 
The  implication  is  that  the  stimulating  effect  which  he  alleges,  de- 
pends upon  the  increment  not  being  expected!  A  future  gain,  not 
now  contemplated,,  is  asserted  to  have  a  present  effect  on  action! 


\ 


\» 


i 


I 


/r 


7 


The  Single  Tax  IN  France  1  131 


§4 

The  Single  Tax  in  France! 

An  alleged  "actual  fact"  makes  a  considerable  impres- 
sion on  persons  as  untrained  in  the  methods  of  science  as 
are  many  students  of  economics  in  some  of  our  best- 
known  colleges  and  universities  where  the  chief  material 
offered  in  economics,  after  the  beginning  course,  is  de- 
scriptive and  narrative,  as  is  most  of  the  material  usually 
presented  in  textbooks  on  taxation  and  public  finance. 
One  who  desires  to  convince  such  students  that  a  given 
policy  is  undesirable  can  find  no  more  effective  method  of 
doing  so  than  to  get  an  historical  case  where  it  was  "ac- 
tually tried"  and  where  it  was  abandoned  because  it 
"didn't  work." 

The  competent  student  of  human  history  knows  that 
many  times  when  a  policy  has  been  abandoned  because  it 
"didn't  work,"  it  has  really  been  given  up  because,  how- 
ever desirable  its  effects  may  have  been  on  the  people- 
in-general,  it  has  been  objected  to  by  some  class  or  classes 
having  power  or  influence.  Indeed,  policies  which  would 
benefit  them  are  often  rejected  by  the  very  persons  who 
would  be  the  beneficiaries.  But  these  facts  the  super- 
ficial observer  does  not  see.  Hence,  the  statement  that 
an  abandoned  policy  was  given  up  because  it  "failed" 
may  seem  to  such  a  one  conclusive. 

Innocently  enough,  doubtless,  so  far  as  intention  is 
concerned,  but  with  a  carelessness  that  he  might  not  have 
permitted  himself  had  the  supposed  facts  in  his  posses- 
sion run  counter  to  his  own  views.  Professor  Merlin 
Harold  Hunter  has  used  this  kind  of  argument  in  his 


ii 


r 


^» 


132         The  Taxation  cf  Unearned  Income 


^'i  V 


Outlines  of  Public  Finance.^^  Near  the  beginning  of  his 
chapter  on  the  single  tax,  Professor  Hunter  refers  to 
France,  the  physiocrats,  and  the  impot  unique  of  these 
economists.^«  Then  he  makes  the  following  amazing  state- 
ments : 

"Much  was  accomplished  in  putting  the  system  into  ef- 
fect until  glaring  inequalities  in  the  tax  burdens  became 
apparent.  Citizens  with  large  incomes  from  stocks,  with 
unquestioned  ability  to  meet  fiscal  burdens,  were  escaping 
entirely,  while  the  poor  landowners  were  able  to  meet  the 
tax  burden  only  with  the  greatest  difP.culty."  The  in- 
justice became  so  marked,  and  the  dissatisfaction  so  evi- 
dent, that  the  impot  unique  was  abandoned."^* 

In  the  Century  Magazine  for  July,  1390,  Mr.  Edward 
Atkinson,  debating  the  single  tax  with  Henry  George, 
made  a  similar  statement.^*  He  said:  "It  (the  single  tax) 
was  presented  more  than  a  century  since  by  the  econo- 
mists of  France  known  as  the  physiocrats ;  it  was  applied 
in  France  under  Turgot,  before  the  French  Revolution, 
with  very  disastrous  results."  But  in  the  Noveml)er  ( 1890) 
number  of  the  Century,  replying  to  a  communication  from 
a  Mr.  James  Middleton,  Mr.  Atkinson  admitted  that  he 

'"New  York  (Harpers),  192X.  See  review  by  the  oresent  writer  in 
the  National  Municipal  Review  (November,  1922),  p.  391;  cf. 
Viner  "Textbooks  in  Government  Finance,"  Journal  of  Political 
Economy,  April,  1922,  pp.  253-55. 

'^.  363. 

"In  regard  to  probable  effects  of  single  tax  on  the  welfare  of  the 
common  man,  the  reader  is  asked  to  compare  this  decidedly  mis- 
leading clause  with  what  is  said  in  sections  i  and  7  of  this  essay. 
The  clause  here  cited  is  perhaps  as  misleading  on  the  principles 
and  probable  effects  of  land-value  taxation  as  it  is  historically. 

"Pp.  363,  364. 

"XL  (New  Series,  Vol.  XVIII),  393. 


I 


Are  all  Goods  Equally  Products  of  Nature?     133 

had  written  incorrectly  and  that  the  single  tax  had  not 
been  tried  in  France.^* 


§5 


Are  All  Goods  Equally  Products  of  Nature f 

Professor  Hunter's  book  contains  many  of  the  current 
arguments  against  the  single  tax.  And  he  apparently  has 
no  sympathy  even  with  the  views  of  those  who  hold, 
without  being  orthodox  single-taxers,  that  land  should 
bear  a  larger  proportion  of  the  total  tax  burden.  The 
often  asserted  difference  between  land  and  various  other 
goods,  viz.,  that  it  is  a  gift  of  nature  and  they  the  products 
of  labor,  he  disallows  in  the  following  passage: 

"Here  is  a  farm,  a  gift  of  nature,  and  on  it  i^  dwelling 
house,  a  product  of  man's  labor.  But  when  a  little  closer 
consideration  is  given  to  the  house,  nature  appears  to  have 
played  a  considerable  part  in  making  provision  for  it. 
The  clay  in  the  brick  was  taken  from  the  hillside;  the 
oak  in  the  floors  was  taken  from  the  forest ;  the  glass  in 
the  windows  was  accumulated  from  various  places.  The 
entire  building  was  a  gift  of  nature — man  has  no  more 
power  to  create  houses  than  to  create  land.  He  simply 
changed  the  materials  of  nature  to  make  them  more  serv- 
iceable, the  difference  being  that  he  exerted  more  effort 
on  some  than  on  others."^^ 

A  very  similar  view  is  presented  bv  Professor  Seligman 
in  his  Essays  in  Taxation,^^  by  Professor  Winthrop  More 


"^XLI    (New   Series,  Vol. 
"Pp.  367,  368. 


:IX),   158. 


"^Pp.  70,  71. 


134 


The  Taxation  of  Unearned  Incomes 


H^ 


"Vested  Rights"  Again 


135 


Daniels  in  his  Public  Finance,'^''  and  by  others.  But  have 
these  authors  never  heard  of  the  theory  of  marginal  pro- 
ductivity, in  which  produced  wealth  is  imputed  in  part  to 
each  of  the  so-called  "factors  of  production?*'  If  they 
have,  they  should  be  able  to  realize  that  there  is  a  sense 
in  which  land,  apart  from  all  improvements  in  or  on  it,  is 
very  much  more  a  gift  of  nature  than  a  building.  Can 
the  land  be  in  any  way  "imputed"  to  labor? 

What  the  single-taxers  are  really  endeavoring  to  do  is 
to  make  a  distinction  between  certain  values  that  can  be 
imputed  to  the  labor  and  thrift  of  individuals  as  such  and 
certain  other  values  that  cannot  be  so  imputed  but  are 
either  gifts  of  nature  or  the  results  of  community  growth. 
If  this  distinction  is  not  always  clearly  presented  and  if 
there   is   sometimes  confusion   about  seemingly  border- 
Une  cases,'^  the  business  of  the  trained  student  of  eco- 
nomics whose  point  of  view  is  the  objective  one  of  the 
scientist,  is  to  dissipate  the  confusions  and  make  the  dis- 
tinction plain.    Yet  here  we  find  three  economists— and 
there  are  many  more  of  like  mind — attempting  to  make 
less  clear  rather  than  more  so  a  really  importan;  distinc- 
tion that  every  student  ought  to  be  made  to  unde/stand; 
and  this  for  apparently  no  other  reason  than  to  discredit 
the  single-tax  philosophy. 

There  are  various  other  arguments  presented  in  Pro- 
fessor Hunter's  book  (as,  also,  in  Professor  Seligman's 
Essays  in  Taxation)  to  which  no  attention  will  here  be 
paid,'  partly  because  of  a  disinclination  so  to  extend  the 
discussion  and  partly  because  they  have  been  discussed 

'"New  York  (Hok),  1899,  P-  82. 

""The  present  writer  has  recently  discussed  certain  of  such  seem- 
ingly border-line  cases  in  The  Economics  of  Taxation,  New  York 
(Holt),  1924,  pp.  220-233. 


I 


at  length  in  the  preceding  essay  in  this  book.  Indeed, 
the  present  writer  considered  them,  or  a  number  of  them, 
prior  to  the  appearance  of  Professor  Hunter's  book,  in 
an  article^®  and  in  two  different  books, '^  one  of  the  books 
being  the  first  edition  of  this  one.  Considerable  attention 
was  given  to  some  of  these  arguments  in  Professor  H.  J. 
Davenport's  article  on  "Theoretical  Issues  in  the  Single 
Tax,"  1917/^  with  which  Professor  Hunter  seems  un- 
familiar.*^ 

§  6 
"Vested  Rights"  Again 

But  the  real  objection  of  conservative  economists  to  the 
single  tax — or  any  considerable  steps  toward  the  single 
tax — flows  from  their  respect  for  "vested  rights."  Says 
Professor  Fairchild  in  his  Essentials  of  Economics: 

"The  present  owners  of  land  have  come  into  possession 
in  good  faith  under  the  present  rule.  Many  of  them  have 
paid  for  their  land  its  full  present  value.  To  proceed  now 
to  take  from  them  the  whole  or  a  part  of  the  value  of  their 
land  or  to  impose  upon  them  discriminatory  taxes  would 
be  an  injustice.  If  there  is  to  be  land  nationalization  it 
can  be  accomplished  justly  only  by  purchasing  the  land 
at  its  fair  value  from  its  present  owners.  Any  other  pro- 
cedure is  like  changing  the  rules  of  a  game,  while  the 

"•"The  Ethics  of  Land-Value  Taxation,"  Journal  of  Political  Econ- 
omy, May,  1917,  pp.  464-92. 

^The  Theory  of  Earned  and  Unearned  Incomes,  iqiR,  zt.1  The 
Taxation  of  Unearned  Incomes,  first  edition,  1921.  Both,  Columbia, 
Missouri    (Missouri  Book   Co.). 

*^American  Economic  Review,  March,  1917,  pp.  1-30. 

*^There  is  in  Professor  Ely's  Outlines  of  Land  Economics,  also,  no 
evidence  of  acquaintance  with  Professor  Davenport's  article. 


4. 


^ 


136         The  Taxation  of  Unearned  Incomes 


game  is  in  progress,  to  the  disadvantage  of  one  contest- 
ant."*^ A  similar  view  seems  clearly  to  be  held  by  Profes- 
sor T.  S.  Adams,**  whose  apparent  contention  that  the  un- 
earned increment  increases  production  in  general  and  is 
"diffused"  in  lower  prices,  not  of  one  sort  of  goods  only, 
but  of  goods  in  general,  we  have  already  noted.**^  It  is 
apparently  subscribed  to  by  Professor  R.  T.  Ely,*®  whose 
opposition  to  special  land-value  taxation  is  well  known. 
It  is  definitely  declared  by  IVofessor  Winthrop  More 
Daniels.*^  And  it  seems  to  have  the  support  of  Professor 
F.  W.  Taussig,*^  of  Professor  C.  J.  Bullock,^»  and  of 
various  other  writers. 

Professor  Daniels  is  thoroughly  consistent  in  his  ad- 
herence to  the  view  that  an  investment  once  made  is  sacred 
as  against  discriminatory  taxation  whether  it  is  in  land 
or  in  a  stock  corporation  having  a  monopoly.  For  he 
asserts  that^**  "when  the  source  of  monopoly  or  unearned 
profits  has  been  once  transferred  from  the  original  owner, 

*"P.  527.     Italics  are  the  present  writer's. 

**See  his  article  on  "Tax  Exemption  through  Tax  Capitalization" 
in  the  American  Economic  Review  for  June,  1916. 

"§  3  of  this  essay  (III). 

*^Outlines  of  Economics,  3d  rev.  ed.  New  York  (Macmillan), 
1916,  pp.  681,  682.  The  fourth  and  latest  edition  (September,  1923), 
does  not  appear  to  contain  the  specific  passages  here  referred  to, 
but  the  passage  on  page  672  (which  is  logically  correct  as  against 
the  theory  there  criticised)  would  probably  be  interpreted  by  most 
readers  as  implying  the  former  view.  Certainly  there  is  no  clear  indi- 
cation of  any  change  in  this  view. 

"Public  Finance,  p.  85. 

*^Principles  of  Economics,  2d  rev.  ed.  New  York  (Macmillan), 
1915,  Vol.  II,  102. 

^'The  Elements  of  Economics,  zdi  ed.  Boston  (Silver,  Burdett  & 
Co.),  1913,  pp.  326-28. 

"P.  85. 


(( 


Vested  Rights"  Again 


137 


special  or  exclusive  taxation  involves  the  expropriation 
of  property  owners,  who  acquired  their  title  by  indefeas- 
ible right." 

By  the  same  logic  it  would  appear  tc  be  unjust  to  reg- 
ulate downward  the  higa  prices  or  ratej  of  public  service 
or  other  monopoly  companies  after  purcn^ises  have  been 
made  of  their  stock,  in  the  expectation  of  the  continued 
receipt  of  unregulated  returns,  by  other  parties  than  those 
who  established  the  monopolies.  If  the  originally  re- 
sponsible persons  have  died,  or  have  sold  out  and  cannot 
be  found,  or  have  sold  out  and  dissipated  their  gains,  it 
must  then  be  the  duty  of  the  public  to  go  on  paying,  in- 
definitely, rates  that  yield  20,  30,  or  40  per  cent,  on  the 
value  of  the  necessary  plants  for  conducting  the  businesses 
— or  else  to  buy  out  the  monopoly  concerns  at  values  ar- 
rived at  by  capitalizing  their  large  anticipated  returns. 

Extreme  cases  are  sometimes  enlightening.  Let  us 
suppose,  then,  a  community  in  which  not  only  is  all  the 
land  owned  by  a  few,  but  in  which  every  article  is  under 
the  control  of,  and  the  price  fixed  by,  a  monopoly.  At 
every  turn  the  common  man  finds  himself  the  victim  of 
exorbitant  prices.  But  the  monopolists,  like  the  land- 
owners, have  bought  the  right  to  these  large  incomes  and 
cannot  justly  be  dispossessed!  The  masses,  even  though 
they  get  control  of  government,  cannot  fairly  reduce  rates 
and  charges  because  this  will  involve  "the  expropriation 
of  property  owners  who  acquired  their  title  by  indefeas- 
ible right."^^  No,  the  masses  must  either  continue  to  pay 
indefinitely  the  high  prices  and  rates  that  have  become 
customary  or  else  they  must  buy  out  the  monopolists  at 
the  fair  present  value  of  the  incomes  that  have  become 
customary!     This  view  of  the  ethics  of  the  case  might 


» 


u 


Daniels,  loc.  ctU 


I 


138         The  Taxation  of  Unearned  Incomes 

seem  a  hard  one  to  persons  whose  real  incomes  were  thus 
forced  to  a  low  level  by  ubiquitous  monopoly.  And  they 
might  decide  that  to  continue  paying  the  monopoly  charges 
would  be  fully  as  easy  as  to  buy  out  the  monopolists  at  the 
capitalized  value  of  their  "indefeasible"  property.  In  any 
case  the  victims  of  the  system  continue  to  be  victims. 
There  seems  reason  to  believe  that,  in  the  eyes  of  econ- 
omists like  Professor  Daniels,  no  other  alternative  is 
permissible. 

But,  in  general,  teachers  and  writers  of  economics  do 
not  seem  inclined  to  insist  as  strongly  on  respect  for  other 
vested  rights  as  on  respect  for  vested  rights  in  land.  Thus, 
there  appears  to  be  a  willingness  to  have  monopolies  reg- 
ulated even  after  innocent  investors  have  bought  stock  in 
the  expectation  of  large  dividends.  There  appears  to  be, 
also,  a  willingneiss  to  see  tariff  changes  even  although  in- 
dustries have  been  established  at  considerable  cost  on  the 
basis  of  existing  tariffs.  There  is  an  apparent  wiUingness 
on  the  part  of  many  that  price  levels  should  be  stabilized 
for  the  future,  if  government  can  be  brought  to  adopt 
the  policy,  even  although  some  persons  have  made  their 
investments  in  the  expectation  that  society  would  permit 
them  to  profit  from  fluctuations  they  believe  they  can 
foresee — and  even  although  other  persons  have  invested 
largely  in  their  own  education  on  the  peculiarities  of  the 
cycle  in  order  that  they  may  gain  from  the  changes  that 
occur  rather  than  lose.  The  Eighteenth  Amendment  must 
have  seriously  damaged  the  property  interests  of  many 
persons  whom  society  had  permitted  to  buy  and  to  build 
specialized  property  for  the  brewing  of  spirituous  liquors, 
who  had  "come  into  possession  in  good  faith"  under  the 
then  existing  rule.  But  the  writer  can  recall  no  protest 
against  this  change  in  the  economics  textbooks  of  any 


"Vested  Rights"  Again 


139 


of  the  current  writers.  Nevertheless,  this  also,  to  use 
the  phrase  adopted  by  Professor  Fairchild,  is  "changing 
the  rules  of  the  game,  while  the  game  is  in  progress,  to 
the  disadvantage  of  one  contestant." 

There  are  various  other  ways  in  which  society  has  been 
guilty  of  "changing  the  rules  of  a  game,  while  the  game 
is  in  progress."    Thus,  the  establishment  of  trade  schools 
has  tended  to  do  this.    Prior  to  the  establishment  of  trade 
schools,  the  craftsman  had  to  learn  his  trade  by  a  long 
period  of  apprenticeship.     The  time  required  tended  to 
limit  competition.    But  the  establishment  of  trade  schools 
operates  to  increase  competition  in  the  trades  for  which 
they  are  provided,  by  bringing  in  new  workers  who  are 
more  quickly  trained.     Thus  the  establishment  of  trade 
schools  may  prevent  the  receiving  of  the  wages  which 
their  sacrifices  and  their  long  apprenticeship  would  have 
otherwise  brought  them,  by  workers  already  in  the  field. 
Ought  not  economists  to  protest  against  the  establishment 
of  trade  schools  by  the  public  as  an  infringement  on 
vested  rights?     But  perhaps  the  vested  rights  of  wage- 
earners  are  not  as  important  as  the  vested  rights  of  prop- 
erty-owners !     A  change  which  lowers  the  wages  of  an 
artisan  does  not  lower  the  capitalized  salable  value  of 
anything,  since  his  prospective  income  is  not  salable  as  a 

whole! 

What  shall  we  say,  then,  regarding  the  rent  of  land .'' 
Is  that  particular  kind  of  income  more  sacred,  more  in- 
violable, than  the  other  types  of  income  we  have  been 
discussing  ?  In  this  connection  it  will  perhaps  be  argued 
that  the  private  receipt  of  land  rent  has  a  longer  and 
less-questioned  prescriptive  sanction  than  the  private  re- 
ceipt of  monopoly  gains,  of  income  from  the  manufacture 
of  spirituous  liquors,  etc.    It  should  be  borne  in  mmd  that 


140         The  Taxation  of  Unilarned  Incomes 

the  claim  which  must  be  held  inviolable  as  against  the 
single  taxers  or  other  advocates  of  increased  land-value 
taxation,  is  a  claim  to  a  future  rent  which  shall  never 
be  reduced  by  taxation  in  such  a  way  as  to  lower  the 
salable  value  of  land.  Society  is  held  to  be  under  a  moral 
obligation  not  to  reduce  the  salable  value  of  land  by  one 
lote  To  do  so  is  like  "changing  the  rules  of  a  game, 
while  the  game  is  in  progress,  to  the  disadvantage  of  one 
contestant."  The  owners  of  land  are  said  to  have  bought 
It  m  the  faith  that  "the  rules  of  the  game"  will  not  be 
changed.  And  this  appears  to  mean  in  the  view  of  many, 
i^  not,  indeed,  most  writers  of  economics  texts,  that  the 
present  taxation  system  should  not  be  changed  at  all  in  the 
direction  of  heavier  relative  taxation  of  land."  Has  so- 
ciety, directly  or  by  implication,  pledged  itself  that  it  will 
not  raise  these  taxes?  Nobody  seems  to  think  that  a 
tax  on  automobiles  cannot  legitimately  be  increased  after 
people  have  bought  automobiles  not  expecting  such  in- 

"Pcrhaps.  in  this  view,  there  should  not  even  be  a  generally  in- 
creased  rate  of  taxation  on  all  property.  For  this  might  lower  the 
salable  yalue  of  land  on  the  constancy  of  which  purchasers  had  re! 
Int  .^^f  '"f"^^^^^*^-^*-°  of  ail  property  might  discourage  sav- 
ing.    If  ,t  did  so,  the  decrease  of  capital  would  tend,  in  the  Ion. 

ral         ^7  ''"  ?^"'  "^  '°  '''  ^*  "^  production.     And  interest 

th?  r  K  ""%  ''  r°"'^  ^''"  '•  "'^^^^  -^^^«  '«  "-  -™«  capital, 
hough  perhaps  less  than  before.  But  at  interest  rates  which,  includ^ 
mg  the  tax.  are  higher  than  they  would  have  been  and.  with  the  tax 
subtracted  almost  as  high  as  they  would  have  been  without  the  tax 
the  capitalized  salable  value  of  the  heavily  taxed  land  rent  woulJ 
be  reduced.  And  the  anticipation  of  this  result  might  conceivably 
cause  the  salable  value  of  land  to  fall  as  compared  wUh  other  vllues 
as  soon  as  a  generally  increased  tax  on  all  property  was  levied-T; 
seriously  proposed!     Cf.  Note  by  H.  Gordon  Ha^.  entitled  "^e 

February,   1920,  pp.  373-80,  especially  p.   376. 


c 


C^ 


{ 


"Vested  Rights"  Again  141 

crease.    And  nobody  seems  to  think  that  other  tax  -ates 
e^g.,  on  tobacco,  may  not  properly  be  changed  if  to  chang^ 
them   seems  expedient.     Is  it  only  landowners  against 
whom  any  increase  of  taxation  is  a  violation  of  faith' 
is  It  only  landowners  to  whom  society  guarantees  no  dis- 
crmimatmg  tax  increase?    Or  would  it  be  reasonable  to 
argue  that  landowners,  like  other  persons,  make  their  con- 
tracts and  buy  their  property  with  no  guaranty  that  public 
pohcy  wtll  not  change,  but  merely  with  the  practical  cer- 
tamty  that  such  important  changes  in  public  policy  as  oc- 
cur will  not  be  precipitate  or  without  the  warning  of  years 
of  agitation  preceding  the  changes  ?" 

The  natural  reaction  of  some  economists  will  perhaps 
be  o  say  that  society  does  have  a  right  to  increase  taxes 
on  land,  but  that  it  has  no  right  deliberately  to  set  out 
upon  a  policy  which  leads  eventually  to  the  single  tax. 
Yet  such  a  position  cannot  be  logically  defended.  For 
once  It  has  been  admitted  that  any  definite  increase  what- 
ever of  land-value  taxation  is  permissible,  the  mathema- 
tician can  point  to  a  smaller  present  increase  plus  future 
additional  increases,  the  application  of  which  would  lower 
the  present  salable  value  of  the  land  no  more. 

"Suppose  that  a  group  of  persons,  by  long  agitation,  succeed  in 
makmg  .t  appear  likely  that  the  single  tax  will  be  adopted  l" 
consequence  of  this  expectation,  land  values  decline  and  many  own" 
ers  sell  land  at  lower  prices  than  they  would  otherwise  charge  Do 
the  persons  who  start  this  agitation  commit  an  immoral  act  lince  it 

f"ans/  r^K^r"  "'  """  '^""''"'  *"  •"'  "'""'•  -'«'  of  land 
falls?    Ought  the  government  to  suppress  such  an  agitation  in  order 

to  protect  "vested  righ;."P  But  what  if  the  government  alCthe 
agitation  to  go  on  until  many  owners  have  sold  land  at  low  Dric« 
counting  on  the  adoption  of  single  tax  and  until  many  other  indi 
viduals,  perhaps,  have  made  valuable  improvements  out  of  current 
savings,  counting  on  a  future  exemption  of  these  improvement,  from 
taxation;  but  finally  does  no/ adopt  the  single  tax!  Are  any  "vested 
rights"  then  infringed? 


142         The  '  axation  of  Unearned  Incomes 

It  may  now  be  said,  however,  that  the  objection  to  the 
single  tax  or  to  heavy  taxation  of  land  is  not  meant  to 
be  an  objection  to  gradual  change.  But  if  their  objection 
is  only  to  sudden  change,  most  economists  have  deftly 
concealed  the  fact.  Nearly  always  there  is  no  intimation 
that  even  gradual  change  is  permissible."     Indeed,  one 

"It  may  be  of  interest  to  some  readers  to  note  that  not  even  by  out- 
right purchase  of  land— if  it  were  really  paid  for  by  taxes  rather 
than  by  creating  a  perpetual  debt— could  we  entirely  avoid  inter- 
ference with  "vested  rights."  Even  by  such  purchase  we  should  be 
"changing  the  rules  of  a  game,  while  the  game  is  in  progress,  to  the 
disadvantage  of  one  contestant."  For  the  persons  who  would  have 
to  pay  the  taxes  necessary  for  buying  the  land,  would  be  the  persons 
who  have  taxable  income  or  property  noiv  or  in  the  ngar  future,  i.  e., 
while  the  tax  is  being  collected.  Such  persons  would,  to  be  sure, 
be  free,  thereafter,  of  taxes,  so  far  as  the  future  collecting  of  eco- 
nomic rent  in  lieu  of  other  taxes  could  free  then.  But  so  ivould 
other  persons  whose  ability  to  pay  taxes,  prior  to  the  period  •/  land 
purchases,  might  he  so  small  that  only  their  usual  tax  contributions 
toward  current  expenses  could  be  secured  and  nothing  additional 
toward  buying  out  the  landlords.  The  freedom  of  these  other  per- 
sons from  future  taxes  is  not  enjoyed  at  the  expense  of  landowners, 
as  such,  but  is  at  the  expense  of  ail  those  who  are  in  a  position  to 
pay  extra  taxes  during  the  land-buying  period  and  who  have  to 
contribute,  not  only  to  buy  themselves  free  of  future  taxation  but 
to  buy  these  others  free  of  future  taxation.  Property  owners  and 
receivers  of  large  incomes  might,  then,  so  buy  free  of  future  taxes 
persons  who  could  not  buy  themselves  free.  The  vested  rights  of 
these  property-owners  are  disregarded.  And  landowners  themselves, 
being  taxed  with  others  to  provide  means  to  pay  foi  the  land— in 
which  thereafter  they  would  be  but  part  owners  with  the  rest  of 
the  community-would  be  helping  to  buy  free  of  future  taxation  per- 
sons who  could  not,  at  the  time,  buy  themselves  free.  So  the  rested 
rights  of  landowners  themselves  might  not  I?  fully  respected  by 
such  a  scheme.  These  considerations  may  not  be  impor-tant  but  they 
are  believed  not  to  be  mathematically  fallacious. 

Lest  this  point  seem  not  quite  clear,  we  may  illustrate  it  by  an 
extreme  but  somewhat  analogous  case.    Let  us  suppose  t  community 


O 


"Vested  Rights"  Again 


143 


1 


recent  writer,   Professor  J.   E.   LeRosiignol,   definitely 
expresses  his  view  of  the  "injustice  and  impracticability" 

of  which  one-third  of  the  members  are  slaves  whose  total  value  is  a 
million  dollars,  one-third  are  the  owners  of  these  salves  and  own  a 
million  dollars  worth  of  other  property  besides,  and  the  last  one- 
third  are  non-slave-owners  who  are  of  equal  wealth  with  the  slave- 
owners, i.  e.,  worth,  in  the  aggregate,  two  million  dollars.  It  is 
decided  to  free  the  slaves  and,  with  the  idea  of  avoiding  an  infringe- 
ment of  the  "vested  rights"  of  slave-owners,  this  is  done  by  purchase. 
A  capital  tax  of  25  per  cent  is  levied  on  all  owiers  of  property,  to 
provide  the  million  dollars  necessary  to  buy  the  slaves  free.  The 
slave-owners  receive  this  million  dollars,  but  have  to  pay  out  half  a 
million  as  their  share  of  the  taxes.  They  are  left  then,  without  the 
million  dollars'  worth  of  slaves  and  wit^  an  extra  half-million  dol- 
lars' worth  of  other  property,  ^r  a  total  of  a  million  and  a  half  in 
value  in  place  of  their  foraer  two  million.  The  other  propertied 
classes  have  to  pay  out  half  a  million  dollars  in  taxes  as  their 
contribution  toward  freeing  the  skves  and  1  ive  a  million  and  a  half 
dollars  worth  of  property  remaining.  The  calves  are  thereafter 
free,  but  the  wealth  of  their  former  owners  and  also  of  the  other 
propertied  class  is  reduced  to  three-fourths  of  its  former  amount. 
Together  they  own,  not  a  million  dollars'  worth  of  slaves  plus  three 
million  dollars'  worth  of  other  property  but  only  three  million  dol- 
lars' worth  of  other  property.  The  slave-owners  have  lost  as  much, 
notwithstanding  they  have  been  paid  for  the  slaves  out  of  property 
and  so  "compensated,"  as  if  they  were  deprived  of  their  property 
more  gradually  without  "compensation."  The  advantage  of  the 
"compensation"  method  is  that  it  frees  the  slave-  instantly  without 
imposing  any  burden  for  payment  upon  them  (p-esumably  they 
have,  at  the  time,  nothing  to  pay  with),  but  this  gain  of  the  slaves 
is  at  the  expense  of  an  infringement  of  the  "vested  rights"  of  the 
non-slave-owning  propertied  classes.  To  pay  for  the  slaves  by  tax- 
mg  all  other  persons  and  not  taxing  the  slaves  would  be,  surely 
"like  changing  the  rules  of  a  game,  while  the  game  is  in  progress! 
to  the  disadvantage  of  one  contestant."  The  only  w.  y  to  free  the 
slaves  without  interference  with  the  "vested  right.'  of  any  property- 
owners  would  be  for  the  slave-owners  to  be  paid  by  a  bond  issue,  the 
interest  and  principal  of  which  (or  the  interest  forever)  should  be 
paid   by  the  slaves  themselves   and  their  descendants!     Similarly, 


■•■ 


144         The  Taxation  of  Unearned  Incomes 

of  the  adoption  of  the  single  tax  "whether  done  at  once 
or  gradually/"^* 

A  comment  on  the  foregoing  argument,  received  by 
the  writer  from  a  specialist  in  the  field  of  taxation,  of 
high  reputation,  seems  to  indicate  the  necessity  for  fur- 
ther explanation.  The  comment  was,  in  part,  that  "mo- 
nopolistic rates  and  charges  are  regulated  only  for  the 
purpose  of  holding  the  monopolist  to  a  reasonable  return*' 

the  only  way  that  the  present  system  of  private  enjoyment  of  land 
rent  and  support  of  government  largely  by  taxation  of  other  in- 
comes and  property  could  be  changed  without  any  violation  of 
"vested  rights,"  would  be  for  the  rights  of  the  landowners  to  be 
bought  out  with  funds  to  the  raising  of  which  all  victims  of  the 
system,  however  poor  they  might  be,  should  contribute. 

It  may  advantageously  be  pointed  out,  before  we  leave  this  topic, 
that  nationalization  of  land  and  government  management  are  not 
the  things  to  be  sought  for.  Rather  should  we  aim  at  individual 
ownership  and  management  and  ease  of  acquiring  such  ownership. 
And  the  way  to  attain  our  end  is  not  to  adopt  the  utterly  imprac- 
ticable and  burdensome  scheme  of  land  purchase,  with  possible  fu- 
ture interest  payments  on  the  national  debt  assumed,  as  great  as 
present  economic  rents,  but  rather  to  remove  gradually  or,  at  least, 
greatly  reduce,  other  taxes  and  to  put  more  and  more  of  the  tax 
burden  upon  bare-land  values. 

Among  various  suggestions  for  land  purchase  by  the  community 
may  be  mentioned  one  for  the  purchase  from  landowners  of  the 
right  to  take,  in  taxation,  all  or  most  of  the  economic  rent  of  land 
beginning  some  fifty  years  hence.  But  if  the  public  become  ever 
seriously  aroused  regarding  the  land  problem,  they  will  hardly  want 
to  wait  fifty  years  before  securing  any  results  at  all;  and  unless 
and  until  they  are  aroused  they  are  unlikely  to  take  interest  in  levy- 
ing higher  taxes  on  themselves  to  pay  for  the  privilege  of  having  a 
reform  begin  (even  if  their  descendants  were  sure  to  do  it)  after 
the  passing  of  two  generations.  All  such  proposals  serve  merely  to 
divert  attention  from  the  only  method  by  which  there  is  any  rea- 
sonable possibility  of  reform,  viz.,  a  step-by-step  substitution  of 
land-value  taxation  for  most  other  taxes. 
'^Economics  for  Everyman,  p.  27a. 


•  /  - 


« 


Vested  Rights"  Again 


145 


and  that  "the  average  landowner  is  getting  only  a  rea- 
sonable return",  that  "investors  in  land  realize  no  greater 
return  than  investors  in  other  forms  of  property"  and 
even  "realize  less"^®  if  his  "observation  and  experience 
are  correct."  So  far  as  the  monopolist  is  concerned,  it  is 
doubtless  true  that  we  regulate  "only  for  the  purpose  of 
holding  the  monopolist  to  a  reasonable  return."  But 
upon  what  value  do  we  desire  that  the  return  shall  be 
"reasonable"?  If  the  present  holders  of  the  stock  of  a 
monopoly  have  purchased  it  at  a  high  price  because  it  was 
expected  that  the  monopoly  would  be  able  to  continue  to 
charge  high  rates  for  the  service  rendered  by  it,  then  the 
high  rates  must  be  allowed  to  continue  or  else  these  hold- 
ers of  stock  will  not  get  a  "reasonable"  return  on  what 
the  stock  cost  them,  on  tPieir  investment.  Yet  much  low- 
er rates  might  suffice  to  yield  a  "reasonable"  return  on 
what  it  would  cost  to  construct  in  duplicate,  the  entire 
plant.  If  investors  must  be  allowed  to  get,  on  the  aver- 
age, a  "reasonable"  return  on  what  they  have  paid,  then 
little  or  nothing  can  be  done  to  terminate  any  exploitation 
of  the  general  public  when  such  exploitation  has  previous- 
ly been  thought  of  as  something  which  would  extend  into 
the  indefinite  future.  If  persons  owning  property  the 
value  of  which  depends  upon  exploiting  power,  have  made 
theirs  plans  and  purchases  on  the  supposition  of  the  in- 
definite continuance  of  such  power,  then  nothing  can  be 
done  to  relieve  any  victims  of  an  exploiting  system,  ex- 
cept as  the  victims  pay  for  their  own  relief. 

■^his  seems  very  clearly  to  be  the  view,  also,  of  Professor  Ely. 
See  his  Outlines  of  Land  Economics,  Ann  Arbor,  Mich.  (Edwards 
Brothers),  1922,  pp.  94,  95.  And  Professor  Ely,  too,  considers  this 
conclusion  as  an  important  argument  against  special  land-value  taxa- 
tion. 


mm 


146         The  Taxation  of  Untearned  Incomes 

Consider  now  the  case  of  the  average  yield  to  owners 
of  land.  However  largely  economic  rent  may  be  due  to 
the  natural  advantages  of  particular  pieces  of  land  and 
to  advantages  due  to  community  growth,  the  rate  of  re- 
turn to  owners  who  have  bought  the  land  in  the  general 
expectation  that  the  economic  rent  would  be  considerable, 
is  only  a  ''reasonable"  rate.  Kven  if  the  land  purchased 
rises  in  value,  the  purchaser  who  bought  it  in  the  light 
of  a  widespread  expectation  of  a  rise,  has  had  to  pay 
so  much  for  it  because  of  that  expectation  that  the  re- 
turn received  by  him,  including  the  rise  in  value,  nets  him 
only  a  "reasonable"  rate  on  the  sum  invested.  So,  if, 
on  the  average,  "reasonable"  rates  of  return  on  invest- 
ments of  any  sort  whatever  are  sacred  because  they  are 
only  "reasonable",  then  monopolists  must  be  allowed 
prices  which  yield  a  very  high  return  on  what  it  would 
cost  to  duplicate  their  plants;  landowners  must  be  al- 
lowed to  receive  economic  rent  and,  frequently,  progres- 
sively higher  and  higher  future  rent  on  land  that  had  no 
cost  of  construction  and  the  value  of  which  is  a  function 
of  social  growth;  and  even  slavery,  if  once  established, 
cannot  be  abolished  unless  the  slaves  buy  themselves  free, 
for  otherwise  the  average  returns  of  slave-<)wners  on 
their  investments  will  be  reduced  below  what  is  "reason- 
able." Indeed  to  abolish  slavery  while  "compensating" 
the  slave-owners  with  funds  raised  by  taxing  the  owners 
of  other  property,  tends  to  tleprive  the  owners  of  this 
other  property  of  a  "reasonable"  return  and  infringes 
on  their  vested  rights.  In  general,  the  only  way  that  any 
kind  of  exploitation,  be  it  slavery,  monopoly  or  the  pri- 
vate collection  of  the  economic  rent  of  land  can  be  ter- 
minated without  infringing  on  the  expectations  and  "vest- 
ed rights"  of  some  group  of  persons,  is  for  the  cost  of  the 


a 


"Vested  Rights"  Again 


147 


•     •*! 


I         /' 


change  to  be  contributed  to  by  all  the  victims  of  the  sys- 
tem of  exploitation  the  termination  of  which  is  sought." 
To  say  that  abolition  of  slavery,  or  regulation  of  mo- 
nopoly charges,  or  increased  taxation  of  land  values  op- 
erates to  lower  the  return  on  mo.iey  invested  in  slaves, 
monopoly  or  land  by  purchasers,  below  the  average  or 
ordmary  rate  in  other  investments,  below  a  "reasonable" 
rate,  amounts  to  the  same  thing  as  to  say  that  such  a 
change  in  policy  lowers  the  salable  value  of  the  property 
of  such  Durchasers.    It  is  merely  a  different  way  of  ex- 
pressing the  fact  that  "vested  rights"  are  infringed.    But 
smce  some  economists  of  reputation,  when  the  conclusion 
has  been  pointed  out  to  them  in  one  way.  have  seemed 
to  thmk  that  an  important  argument  against  land-value 
taxation  was  overlooked  because  the  case  was  not  stated 
!n  the  mathematically  equivalent  other  way,  both  forms 
of  statement  are  now  included  in  our  discussion. 

Economists  sometimes  refer,  in  this  connection,  to  the 
fact  that  land  may  fall  in  value  as  well  as  rise,  i  e  that 
there  may  be  a  "decrement"  instead  of  an  increment,  as 
if  such  a  fact  were  somehow  relevant  to  the  problem  '  In 
truth,  a  fall  in  the  value  of  land  merely  means  that  land 
owners  are  able  to  get  less  rent  than  before,  albeit,  usual- 
ly, still  something,  for  advantages  due  not  to  them  but  to 
nature,  to  population  growth,  or  to  civic  improvement. 

It  IS  customary  to  attempt  the  annihilation  of  the  "sin- 
gle-tax" case  partly  by  alleging  that  it  is  based  on  a  doc- 
trine of  "natural  rights."««  Yet  this  chief  objection- 
vested  rights— commonly  raised  against  it  seems  also  to 

^Sce  discussion  in  long  footnote  beginning  on  page  142 
Sec.  for  example.  Ely,  Outlines  of  Economics^  3d  rev.  ed..  p.  681. 
The  writer  does  not  find  this  reference  in  the  fourth  and  latest  (Sen- 
tember,  1923)  edition.  ^  ^ 


I 


148         The  Taxation  of  Unearned  Inco 


MES 


be  based  upon  "natural  rights"  or  something  fundamen- 
tally similar.  For  just  as  in  the  view  of  the  orthodox 
single-taxer,  everyone  has  a  natural  right  to  tHe  use  of 
land,  so  in  the  view  of  many  writers  of  textbooks  on 
economics  every  landowner  has  a  kind  of  "natural''  right 
not  to  have  the  salable  value  of  his  land  lowered  by  taxa- 
tion. We  are  dealing  here,  apparently,  with  an  intuitive 
ethics.  Economists  do  not  say  that  thr  proposed  tax  re- 
form is  wrong  because  of  injurious  consequences  antici- 
pated to  the  general  welfare,  but  merely  that  it  is  wrong 
or  immoral  or  unjust.  In  this  matter  they  seem  to  ex- 
perience a  sense  of  shock  at  the  mere  proposal,  which 
prevents  any  really  free  objective  investigation  of  cause- 
and-effect  relations.  Hence  the  discussion  of  the  subject 
by  many  economists  presents  the  appearance,  not  so  much 
of  a  search  to  discover  whether  the  general  effects  of 
single  tax  would  probably  be  beneficial  or  the  reverse,  but 
of  an  attempt  to  prove  the  policy  wicked.  One  rather 
gets  the  impression,  then— is  ?t  a  false  one?— that  in  the 
minds  of  most  writers  of  economics  texts  ideas  of  sacred- 
ness  cluster  about  property  in  prospective  land  rent  to  a 
more  marked  degree  than  about  various  other  kinds  of 
property.  And  Professor  Robinson  has  said^»— could  he, 
by  any  chance,  have  been  right !— that  "if  a  thing  is  held 
to  be  sacred  it  is  the  center  of  what  may  be  called  a 
defense  complex"  so  that  "a  reasonable  consideration  of 
the  merits  of  the  case  will  not  he  tolerated."  The  sense 
of  proportion  of  many  economists  has  beer,  hopelessly 
dulled  by  their  making  of  the  doctrine  of  vested  rights  a 
veritable  fetish.  Otherwise,  the  insistence  that  society, 
which  makes  frequent  changes  of  policy  in  other  matters, 

''James  Harvey  Robinson,  The  Mind  in  the  Making,  New  York 
'Harpers),  1921,  p.  92. 


T 


I 


l 


SCHo 


I 


"Vested  Rights"  Again^ 


-i-  X  \ 


xU^ 


IS  under  a  binding  implied  pledge  and  obligation  never  to 
move,  no  matter  hozv  gradually,  towards  the  eventual  tak- 
ing m  taxation  of  the  major  part  of  economic  rent  would 
be  clearl:  seen  to  be,  as  in  fact  it  is,  utterly  silly. 
^    Occasionally,  however,  the  objection  is  made  to  heavy 
mcrease  of  land-value  taxation  that  this  would  destroy 
the  sense  of  security  and  weaken  the  incentive  to  accumu- 
late !    Do  any  economists  seriously  believe  that  a  gradual 
substitution  of  land-value  taxation   for   taxation   which 
penalizes  activity  and  thrift  would  have  any  such  result  ? 
Is  there  any  evidence  that  such  a  consequence  has  been 
experienced  in  Pittsburg  and  Scranton,   Pa.,  in  North- 
western Canada  and  in  other  places  where  steps  have  been 
taken  in  this  direction?     Has  the   development  of  the 
policy  of  regulating  the  rates  of  public  service  monopolies 
Drought  about  any  such  undesirable  effect?     Or  is  the 
presenting  of  the  contention  merely  one  more  bit  of  evi- 
dence that  conservative  economists  are  determined  to  find 
some  argument— flwy  argument— against   the   increased 
taxation  of  land  values  ? 

Many  professional  economists,  it  is  suspected,  have 
never  permitted  themselves  to  think  long  and  without 
bias  on  the  subject,  examining  carefully,  and  not  merely 
to  discredit  them  in  debate,  the  arguments  of  the  single 
taxers.  V/ith  some  exceptions,  they  seem  to  have  ac- 
cepted the  views  of  their  conservative  teachers  as  ex- 
pressed in  current  texts.  That  the  single  tax  is  unsound 
because  it  is  based  on  a  doctrine  of  "natural  rights,"  that 
it  cannot  be  levied  so  as  to  distinguish  at  all  fairly  between 
bare-land  values  and  labor-produced  values,  that  there  is 
no  such  difference  anyway  because  everything  is  in  large 
part  a  gift  of  nature,  that  there  arc  other  unearned  in- 


I 


f! 


/ 


150         The  Taxation  of  Unearned  Incomes 

comes  and  increments  besides  land  rent  and  land  values,«« 
and  that,  anyhow,  any  change  is  unjust,  are  contentions 
generally  familiar  and  quite  commonly  accepted.  And 
where  economists  whose  voluminous  writing,  or  whose 
apparent  familiarity  with  all  that  has  been  previously 
written  on  taxation,  or  whose  high  academic  position  in 
long-established  institutions  gives  them  reputation,  are 
called  upon  to  render  "expert"  advice  regarding  taxation, 
they  are  not  unlikely  to  advise  something  other  than,  or 
to  advise  definitely  against,  higher  taxes  on  land  values. 
And  the  graduate  student  or  young  teacher  who  has 
memorized  the  arguments  summarized  above  feels  no 
special  inducement  further  to  investigate  the  views  of  a 
school  of  writers— the  single-taxers— who  are  largely 
outside  the  academic  fold,  who  are  supposed  to  adhere 
to  an  eighteenth-century  ethical  standard  from  which 
academic  economists  believe  themselves  emancipated,  and 
the  acceptance  of  whose  conclusions  even  with  qualifica- 
tions would  brand  him  as  a  heretic. 

Increased  Land-Value  Taxation  an-^  the  Chances  of  the 

Common  Man 

Certain  important  effects  which  increased  land-value 
taxation  when  accompanied  by  decreased  taxation  of  com- 
modities, capital,  and  incomes,  would  tend  to  produce  are 
consistently  ignored  by  most  writers  of  our  economics 

"This  contention  is  discussed  at  length  at  an  earlier  point  in  the 
book.  See  II,  §  7.  It  is  believed  that  what  Professor  Seligman 
says  on  pages  81  and  82  of  his  Essays  in  Taxation,  9th  edition,  it 
there  adequately  answered. 


J 


*t 


£ 


A 


The  Chances  of  the  Common  Man 


151 


texts.  Being  above  all  things  scientists,  they  are  more 
interested  in  showing  the  non-conformity  of  the  policy 
to  their  intuitive  ethics  than  they  are  in  exhibiting  its 
probable  consequences! 

Perhaps  the  most  significant  probable  consequence  is  a 
decrease  of  tenancy  or,  at  least,  an  increased  ease  of 
becoming  an  owner  of  land.  For,  as  the  opponents  of 
'  single  tax  are  fond  of  pointing  out  in  their  references  to 
"vested  rights,"  increased  land-value  taxation  would  re- 
duce the  salable  value  of  land.  Lower  selling  values  of 
land  make  the  purchase  of  land  for  farms,  homes,  or 
business  easier.  And  not  only  would  a  higher  tax  on  land 
values  make  a  lower  selling  price  but  also,  by  virtue  of  it, 
other  taxes  could  be  correspondingly  reduced.  If  labor 
and  interest  incomes  were  less  taxed,  it  would  be  easier  to 
accumulate,  out  of  earnings,  the  money  necessary  to  buy 
a  piece  of  land.  Despite  the  conventional  acceptance  by 
economists,  almost  as  a  fetish,  of  the  "ability  theory  of 
taxation,"  it  does  not  at  all  necessarily  follow  that  taxa- 
tion according  to  "ability,"  in  the  sense  commonly  under- 
stood, most  conduces  to  the  general  well-being.  Indeed, 
it  may  be  that  the  advocates  of  it,  who  have  plumed  them- 
selves upon  their  sympathy  with  the  common  man,  have 
so  been  in  some  degree  auxiliaries  of  the  forces  of  re- 
action. 

But  there  is  another  way  of  looking  at  this  matter, 
which,  to  many,  may  seem  even  more  significant.  We  all 
know  that  success  is  frequently  a  precarious  thing.  Some- 
times the  business  changes  of  a  few  months  sweep  away 
the  accumulations  of  a  lifetime.  So,  too,  sickness  or 
some  miscalculation  for  which  we  may  or  may  not  be 
entirely  to  blame,  will  occasionally  leave  us,  after  years 
of  effort  and  thrift,  financially  where  we  started.  Our 
children,  then,  or,  if  not  our  children,  perhaps  our  grand- 


I 


T 


152 


The  Taxation  of  Unearned  Incomes 


children,  have  to  begin  a  struggle  which  we  fondly  hoped 
they  would  be  spared.  If  land  is  comparatively  untaxed, 
then  it  is  made  harder  for  them  to  get  started.  The  in- 
comes they  may  earn  have  to  be  taxed  directly  or  in- 
directly, and  they  can  save  but  slowly.  The  value  of  land 
is  high  and  they  cannot  soon  buy  land.  They  may  be 
obliged  to  remain  tenants  or  laborers  for  years — ^perhaps 
so  long  as  they  live.^^ 

To  tax  land  values  more  and  other  things  less  would 
be,  therefore,  a  reform  somewhat  similar  in  principle  to 
the  abolition  of  imprisonment  for  debt,  to  the  doing  away 
with  debt  slavery,  and  to  the  establishment  of  bankruptcy 
laws.  We  would  protect  the  individual — ourselves,  our 
children,  our  grandchildren — from  the  danger  of  falling 
so  hopelessly  low  in  tht.  economic  scale  as  is  now  possible. 
High  land  prices  may  mean  prosperity  for  some.  But 
there  can  be  no  question  that  they  tend  to  make  the  situa- 
tion of  the  property  less  person,  even  though  he  be  hard- 
woikmg  and  thrifty,  comparatively  hopeless.  And,  para- 
doxical as  it  may  appear  to  those  who  ^«:.ve  never  thought 
about  it,  the  levying  even  of  progressive  taxes  on  incomes, 
along  with  the  ordinary  taxes  on  commodities  and  prop- 
erty, as  an  alternative  to  special  taxes  on  land  values,  may 
keep  such  hardworking  and  thrifty  persons  down  eco- 
nomically because  it  keeps  land  prices  up.  A  tax  on  land 
values  is  fully  made  up,  for  such  prospective  buyers,  by 
reduced  land  prices  and,  if  land  speculation  is  so  dis- 
couraged, more  than  made  up.     But  taxes  on  commodi- 

"^Taxing  land  values  at  a  high  rate  does  lot,  of  course,  provide  a 
guaranty  that  all  tenants  will  be:ome  property  owneri.  Nor  is  it 
necessarily  desirable  that  they  should.  Some  persons  work  better 
under  the  direction  of  others. 


The  Chances  of  the  Common  Man 


153 


ties,  capital,  and  incomes®^  are  always  some  burden  to  the 
hardworking  and  thrifty  property  less  person,  unless  they 
are  so  levied — assuming  this  :  3  be  possible — that  no  part 
of  any  of  them  falls  directly  upon,  or  is  shifted  to,  him.®* 
It  is  to  be  noted  that  the  end  sought  can  be  fully 
achieved  only  by  a  general  tax  on  all  economic  rent  or 
land  values.    A  progressive  tax  on  land  values  (progres- 
sively higher  as  the  land  owned  by  the  taxpayer  is  of 
greater  value),  since  the  highest  tax  could  hardly  take 
more  than  the  entire  rent,  would  leave  small  holdings 
comparatively  untaxed.     This  would  leave  the  price  of 
land  fairly  high  and  keep  it  hard  for  persons  of  small 
means  to  acquire  land.    Large  holders  would,  indeed,  pre- 
fer to   sell.     But   their  financial   position  need   not  be 
seriously  injured  or  that  of  their  former  tenants  greatly 
improved.    For  they  could  dispose  of  their  land  to  these 
tenants  and  others  on  mortgage  security,  so  ceasing  to 
hold  title  and  avoiding  the  progressive  tax.  Or  they  could 
organize  numerous  corporations  each  of  which  would  own 
a  small  amount  of  land  and  in  all  of  which  the  original 
large  holders  of  land  could  keep  control,  or  they  could 
avoid  the  tax  in  other  ways.     It  is  also  to  be  noted  that 
really  to  penalize  large  holdings  as  such  might  operate 
to  force  small-scale  business  even  where  large-scale  busi- 

"^The  incidence  and  other  economic  consequence  of  taxes  on  com- 
modities, labor  incomes,  capital  and  its  interest,  property  in  general, 
etc.,  are  discussed  at  length  in  the  author's  recent  book,  The  Eco- 
nomics of  Taxation,  New  York  (Holt),  1924. 

"In  view  of  the  above  facts  and  of  others  discussed  in  this  book 
the  conclusion  seems  inesca^  able  that  the  passage  from  Voltaire 
which  Profesor  Seligmai  refers  to  ou  pages  79  and  80  of  his  Es- 
says in  Taxation,  9th  edition,  apparently  ith  approval  ?nd  as  a 
means  of  helping  to  discredit  the  "single  tax"  v'ew  is  a  most  afair 
statement  of  the  case. 


k^iU..>*!|SK 


ifeatf 


154         The  Taxation  of  Unearned  Incomes 

ness  would  be  more  economical.  Thus,  it  might,  if  eva- 
sion were  impossible,  prevent  the  establishment  of  depart- 
ment stores  and  cause  the  establishment,  instead,  of  small 
specialty  stores.'* 

But  even  when  this  advantage  (viz.,  the  protection  of 
the  individual  against  the  danger  of  falling  so  hopelessly 
low  in  the  economic  scale)  of  levying  taxes  largely  on 
land  values  is  carefully  pointed  out,  objections  are  made 
which  indicate  either  an  unwillingness   (perhaps,  some- 
times, mere  carelessness)   or  an  inability  thoroughly  to 
analyze  the  problem.     For  example,  it  is  sometimes  said 
that  the  greater  cheapness  of  land  is  no  advantage  to 
would-be  owners  since,  although  the  land  is  made  cheaper 
by  land-value  taxation,  the  greater  tax  offsets  the  lower 
selling  price.    The  new  owner,  it  is  said,  merely  pays  the 
tax  instead  of  the  higher  purchase  prici.  or  instead  of 
interest  on  a  larger  mortgage.     Those  who  present  the 
above   argument   apparently   overlook  entirely   the   fact 
that,  if  the  greater  annual  tax  on  the  land  no  more  than 
offsets  the  lower  purchase  price,  then  the  reduction  of 
other  taxes,  including  taxes  on  improvements,  is  all  clear 
gain.    And  they  also  overlook  the  fact  that  the  greater  tax 
on  land  values,  by  discouraging  speculation  in  land,  i.  e., 
by  increasing  the  competition  of  landowners  to  get  their 
land  used,  lowers  land  rent.     The  salable  value  of  land 
therefore  falls,  partly  because  the  rental  yield  which  is 
capitalized  into  a  salable  value  is  reduced  by  this  compe- 
tition, as  well  as  partly  because  the  remaining  rent  is 
further  reduced  by  the  increase  of  iand-value  taxation. 

•*No  criticism  is  here  intended,  however,  of  those  who  favor  pro- 
gressive taxation  of  bare-land  values  because  the:  think  it,  for  po- 
litical reasons,  a  good  entering  wedge  to  bring  about,  cventu.Uy, 
non-discriminating  taxation  of  bare-land  values. 


The  Chances  of  the  Common  Man 


155 


'  t 


I 


Hence,  the  new  buyer  finds  that  the  greater  cheapness  of 
land  more  than  offsets  the  increased  tax  which  he  has 
to  pay  on  it,  even  if  his  other  taxes  are  not  reduced — as 
they  thereafter  can  he.^^ 

But  some  may  still  insist  that  there  is  as  much  reason 
for  interfering  by  taxation,  or  otherwise,  with  the  right 
to  receive  income  from  capital  as  with  the  privilege  of 
drawing  rent  from  land,  seeming,  despite  such  arguments 
as  have  been  presented  in  the  foregoing  pages,  to  see  no 
distinction  between  land  values  and  capital  values  of  any 
significance  for  public  policy.®*  In  order  to  give  every 
reasonable  consideration  to  those  who  hold  such  a  view 
let  us  inquire  carefully  what  would  happen  if,  instead  of 
^  removing  taxes  from  capital  and  putting:  them  on  land 
values,  we  should  do  just  the  opposite,  i.  e.,  remove  taxes 
from  land  values  and  put  them  on  capital.  The  net  income 
from  capital  would  thus  be  reduced.  Unless  and  until 
this  fact  caused  a  decrease  of  saving  and  so  lessened  the 
supply  of  capital  and  raised  interest  rates,  the  net  rate 
of  interest  realized  on  capital  would  be  lower.  But,  cer- 
tainly over  any  considerable  period,  the  value  of  capital 
goods  could  not  be  less  than  the  cost  of  production  of 
such  goods,  else  capital  would  not  be  constructed  even 
to  take  the  place  of  old  capital  wearing  out,  and  there 

"Although  the  competition  to  put  good  idle  land  into  use  lowers  the 
ecomonic  rent  that  an  owner  can  get  on  his  land,  i.  e.  his  income  as 
an  ov^nefj  his  labor  income,  as  such,  is  increased.  In  the  technical 
terminology  of  economic  theory,  labor  is  more  productive,  having 
more  and  better  land  available  to  work  with  and  the  product  of 
industry  attributable  to  labor  is  greater,  while  the  part  attributable 
("imputable")  to  land  and  collectible  as  rent  is  less. 

•^his  seems  to  be  the  attitude  taken  hv  Professo^  Ely  in  his  Out- 
lines of  Land  Economics,  Ann  Arbor,  Mich.  (Edwards  Brothers), 
1922,  Vol.  Ill,  p.  103. 


I 


I 


1 


156 


The  Taxation  of  Unearned  Incomes 


would  finally  be  no  capital  at  all.    It  seems  obvious,  there- 
fore, that  no  considerable  cheapening  of  the  salable  value 
of  capital  could,  in  the  long  run,  be  expected  from  the 
heavier  taxing  of  capital.    But  the  correlative  lighter  tax- 
ation of  land  values  would  encourage  speculation  in  land, 
keep  land  out  of  use  and  make  land  rent  higher.     The 
fact  that  from  this  higher  rent  less  was  taken  in  taxation 
would  mean  a  greater  increase  of  net  rent  tlian  of  gross 
rent.     The  capitalized  value  of  land,  even  ii  the  interest 
rate  at  which  the  land  was  capitalized  did  not  fall  as  a 
consequence  of  the  increased  tax  on  capital,  would  tend 
to  rise  in  as  great  a  proportion  as  its  net  rent.    It  would 
be  harder  for  an  ambitious  and  thrifty  but  poor  man  to 
save  enough  to  buy  a  piece  of  land.    And,  after  he  had 
bought  it,  though  the  tax  on  his  land  value  would  be  less, 
the  tax  on  any  improvements  he  might  make  would  be 
more.    The  increase  of  tenancy  would  be  accentuated. 

But  to  remove  taxes  from  other  things  and  impose  them 
on  land  values  would  cheapen  land  and  make  it  easier  to 
acquire,  while  capital  goods  could  not  become  worth  more 
than  the  cost  of  duplicating  them.     Owners  of  land  and 
capital  would  pay  heavier  taxes  on  their  land  but  lower 
or  no  taxes  on  their  capital.    If  they  intended  to  continue 
using  their  land  rather  than  to  sell  it,  its  lower  salable 
value  would  be  no  injury  to  them.    Owners  of  land  who 
intended  to  sell  it  in  order  to  buy  other  land  would  lose 
no  more  as  sellers  by  the  fall  in  the  .salable  value  of  land 
than  they  would  gain  as  buyers.     Owners  of  land  who 
intended  to  sell,  not  for  the  purpose  of  reinvesting  but 
in  order  to  use  up  the  proceeds  in  current  s!onsumption, 
would,  indeed,  lose,  since  the  reduced  salable  value  of 
their  land  would  mean  diminished  possibilities  in  the  way 
of  such  consumption.    Owners  of  unimproved  and  slight- 


^. 


The  Chances  of  the  Common  Man 


157 


ly  improved  land  would  lose,  at  least  temporarily,  since  the 
increased  taxation  of  their  land  would  more  than  offset 
any  decreased  taxation  of  their  capital.  But  even  they,  if 
they  were  hardworking  and  thrifty,  would  gain  from  the 
reduction  or  abolition  of  taxes  on  capital,  since  whatever 
capital  they  might  thenceforth  accumulate  would  be  less 
taxed  or  not  taxed  at  all.  In  cases  where  their  future 
accumulations  in  general  or  their  future  improvements 
on  their  land  were  considerable,  a  net  benefit  might  be 
realized  even  by  some  persons  who,  at  the  time  the  change 
went  into  effect,  had  little  or  no  property  except  in  unused 
land.  To  tax  land  values  rather  th  m  improvements  cer- 
tainly does  not  guarantee  fortunes  to  the  thriftless.  It 
means  heavier  taxes  on  the  non-improving  owners  of 

land.    It  does  nothing  to  encourage — discourages  rather 

the  holding  of  land  by  persons  too  thriftless  tc  use  it  well. 
It  does  remove  a  penalty  now  generally  placed  on  thrift 
and  land  improvement.  Unlike  part  of  our  present  taxa- 
tion system,  it  is  not  communistic.  It  does  not  try  to  re- 
duce the  efficient  to  the  level  of  the  inefficient.  It  does  not 
try  to  reduce  the  thrifty  to  the  level  of  the  unthrifty. 
Finally,  despite  its  non-communistic  character,  the  taxa- 
tion of  land  values  rather  than  improvements,  incomes, 
commodities,  etc.,  gives  a  better  chance  to  the  ambitious 
poor  to  get  started  economically  and  to  acquiro  a  com- 
petence. 

The  net  effects  likely  to  be  produced  by  a  system  of 
raising  revenues  as  largely  as  possible  from  taxes  on 
bare-land  values  can  perhaps  best  be  visualized  if  the 
reader  will  inquire  as  to  the  probable  consequences  of  the 
adoption  of  such  a  system  in  every  state  of  the  United 
States  but  his  own.  Where  would  people  pre/er  to  invest 
capital— in  his  state  or  outside?     Where  would  people 


■PH 


15& 


The  Taxation  of  Unearned  Incomes 


anxious  to  accumulate  capital  and  improve  their  land 
prefer  to  live?  Where  would  persons  anxious  to  start 
large  enterprises  prefer  to  start  ^hem?  Where  would 
persons  anxious  to  become  home  owners  feel  inclined  to 
buy  land  and  build?  Where  would  laborers  be  more 
likely  to  find  desirable  opportunities  for  employment? 
Is  that  policy  the  more  desirable  which  would  attract 
capital  and  labor  ?  Or  is  that  policy  to  be  preferred  which 
makes  the  community  adopting  it  a  less  promising  one 
for  both  capital  and  labor  ? 

For  the  benefit  of  those  economists  who  may  still  be 
determined  to  admit  nothing,  it  is  perhaps  worth  while 
to  put  the  matter  in  the  form  of  a  dilemma.    Either  the 
substitution  of  land-value  taxation  for  other  taxes  lowers 
the  salable  value  of  land  or  it  does  not.    //  it  does  not, 
then  the  talk  about  "vested  rights"  is  nonsense  even  from 
the  conservative  point  of  view.    If  it  does,  then  there  can 
be  no  denying  that  such  a  tax  removes  obstacles  which  now 
stand  in  the  way  of  the  economic  progress  of  the  thrifty 
poor  and  the  economic  rehabilitation  of  those  whom  for- 
tune has  dealt  heavy  blows.    Why  try  to  blink  the  issue  ? 
If    conservative    economists    really    believe    the    "vested 
rights"  argument  to  be,  of  itself,  a  sufficient  objection  to 
change,  why  not  frankly  say  so  instead  of  contending  that 
such  change  would  not  bring  results  which  reason  clearly 
indicates  it  would  bring  or  instead  of  ignoring  the  likeli- 
hood of  such  results?    Does  the  explanation  He  in  a  fear 
that   an   argument  which  to   them   is  conclusive  might 
seem  inadequate  to  some  of  their  readers?    Or  do  they 
feel  the  proposal  to  tax  land  values  more  heavily  to  be  so 
vicious  that  it  must  be  attacked  from  numy  angles? 

There  are  a  considerable  number  of  the  more  "liberal" 
present-day    economists    who,    like   the    socialists,    with 


Vested  Rights  and  Future  Increments       159 

whom,  however,  they  would  be  otherwise  at  odds,  class 
only  labor  incomes  as  "earned"  and  class  all  incomes 
from  property,  whether  interest  on  capital  or  rent  of 
land,  as  "unearned,"  and  who  are  favorably  disposed 
towards  discriminatory  taxes  on  what  they  call  "un- 
earned" incomes.  The  impropriety  of  such  a  classification 
has  been  sufficiently  shown  in  the  first  p::rt  of  this  book.®^ 
But  it  is  desired,  at  this  point,  to  cail  the  attention  of 
these  economists,  and  of  readers  in  general,  specifically 
and  most  emphatically  to  the  difference  in  the  conse- 
quences which  are  likely  to  ensue  according  as  we  levy 
taxes  on  the  income  from  capital  or  on  the  rental  value 
of  land.  It  sometimes  looks  as  if  a  good  many  econ- 
omists were  willing  to  make  every  kind  of  distinction 
which  might  seem  to  indicate  sympathy  with  the  common 
man  except  the  one  distinction  the  application  of  which 
would  do  the  common  man  most  good. 


§8 


Do  We  Avoid  Trenching  on  Vested  Rights  by  Taxing 
Only  Future  Increases  in  Land  Values? 

Despite  the  apparent  condemnation  by  a  large  propor- 
tion of  text-writing  economists,  of  the  single  tax,  there 
yet  seems  to  lurk  a  feeling  that  something  should  be  done 
about  land  rent.  But  how  can  somethin  ^  be  done  without 
interfering  with  the  sacred  rights  of  ownership  intuitively 
determined?  The  answer  of  many  economists  is,  to  tax 
future  increases  in  the  value  of  land.  To  do  this,  it  is 
supposed,  would  not  interfere  with  vested  rights  because 

"Seel,  S§  4  and  5 ;  also  II,  §  z. 


160         The  Taxation  of  Unearned  Incomes 


I  ^  •* 


Vested  Rights  and  Future  Increments        161 


it  supposedly  would  not  lower  the  salable  value  of  land. 
In  the  simple  phraseology  of  Professor  Fairchild's  book, 
written  for  high-school  pupils,  "there  is  nothing  unjust 
about  this."®« 

And  yet,  this  also  resembles  "changing  the  rules  of  a 
game,  while  the  game  is  in  progress,  to  the  disadvantage 
of  one  contestant."  For  the  adoption  of  such  a  policy 
on  any  extended  scale  would  be  likely,  as  the  present 
writer  has  several  times  pointed  out,^^  to  lower  the  current 
salable  value  of  land  in  comparison  with  other  goods. 
Indeed,  considered  as  a  mathematical  proposition,  the 
argument  is  just  as  convincing  for  reduced  present  value 
of  land  consequent  upon  a  definitely  promised  tax  on 
future  increment  of  value  as  for  reduced  present  value 
consequent  upon  a  definitely  promised  increased  taxation 
rate  upon  the  entire  value  of  the  land.  The  purchaser 
of  a  piece  of  land,  in  buying  it  and  in  determining  the 
maximum  price  he  can  aflford  to  pay — as,  also,  the  seller 
in  determining  the  minimum  price  he  can  afford  to  take — 
considers  as  well  the  possibilities  of  future  increases  in 
value  as  the  present  rental  yield.  A  piece  of  land  may 
sell  for  about  $1,000,  not  because  of  any  present  yield, 
but  because  of  the  estimate  that,  after  fourteen  years,  it 
will  yield  a  net  annual  income  of  $100  and  be  worth  (cap- 
italized on  a  5  per  cent,  basis)  approximately  $2,000. 
Suppose  that,  on  the  day  after  a  purchaser  has  possessed 
himself  of  such  a  piece  of  land  at  a  price  of  $1,000,  it 
suddenly  and  unexpectedly  becomes  evident  that  half  of 
the  increment  in  value,  at  the  end  of  fourteen  years,  is  to 
be  taken  in  taxation!  Would  not  the  present  salable 
value  at  once  fall  to  $750?    And  if  the  increment  tax  were 

"P.  527. 

•See  article  and  books  referred  to  earlier  in  this  paper. 


to  be  100  per  cent.,  would  not  the  present  value  at  once 
become  $500?  Yet  economists  like  Professor  Fairchild — 
who  is  here  referred  to  not  as  an  isolated  errant  writer 
but  as  following  the  beaten  track — can  say  on  the  same 
page^®  that  discriminatory  taxes  on  land  "would  be  an 
injustice"  and,  of  a  tax  on  future  increases  in  value,  that 
"there  is  nothing  unjust  about  this" ! 

In  truth,  in  a  rapidly  growing  country,  the  present 
value  of  a  very  large  part  of  the  land  is  probably  aifected 
by  the  estimate  of  or  the  reasonable  hope  of  future  in- 
creases.   Even  land  which  actually  does  not  rise  in  value 
may  have  high  present  value  because  of  the  expectation 
of  such  a  rise,  and  the  partial  destruction  of  this  expec- 
tation by  a  prospective  increment  tax  might  lower  its 
present  value.     Suggest,   for  such  a  country,  any  rate 
whatever  of  taxation  of  future  increments  and  it  becomes 
at  once  possible  for  the  mathematician,  if  he  has  the 
requisite  data,  to  work  out  a  lower  (at  first),  but  gradual- 
ly increasing  rate  on  the  entire  value  of  land,  becoming 
eventually  high  enough  to  absorb  the  entire  rental  yield, 
which  would  lower  the  present  salable  value  of  land,  on 
the  average,  no  more  than  the  increment  tax.    This  con- 
clusion will  be  obvious  to  any  mathematician.     Indeed,  it 
requires  only  a  very  little  knowledge  of  mathematics  to 
grasp  it.     There  is  no  occasion  for  anyone  to  be  vain- 
glorious over  his  comprehension  of  it.     But  many,  if  not 
most,  of  the  American  economists  who  have  become  prom- 
inent as  the  authors  of  textbooks,  not  only  do  not  mention 
it  but  write  as  if  it  were  untrue. 

Professor  Taussig  seems  clearly  to  understand  that  the 

value  of  a  piece  of  land  is  affected  by  its  expected  future 

rent.     Thus,  he  slates^^  that  in  a  growing:  city  "an  ad- 
™P.  527. 
^Principles  of  Economics,  2d  rev.  ed.,  Vol.  II,  p.  98. 


N 


162 


The  Taxation  of  Unearned  Incomes 


vantageous  site  will  command  a  price  more  than  in  pro- 
portion to  its  present  rent ;  because  it  is  expected  that  the 
rent  will  increase  still  further  as  the  years  go  on."  A 
little  further  on,"  referring  specifically  to  "the  problem  of 
vested  rights,"  he  says: 

"To  the  present  owners,  the  capitalized  value  represents 
an  investment  or  an  inheritance,  precisely  as  does  the 
present  value  of  anything  which  is  capital  in  the  strict 
sense.  Here,  again,  unless  the  whole  institution  of  private 
property  be  remade  or  abolished,  the  existing  rights  to 
land,  as  they  have  been  allowed  to  develop  through  the 
centuries,  must  be  respected." 

And  yet.  after  having  thus  pointed  out  that  present  val- 
ues are  affected  by  prospective  future  increases  of  rent, 
and  after  having  indicated  his  respect  for  the  doctrine  of 
vested  rights.  Professor  Taussig  proceeds  to  defend  the 
taxation  of  future  increments  !^*  "The  question  is  differ- 
ent." he  says,  "as  regards  the  rise  in  rent  that  is  still  to 
come.  There  is  no  vested  right  in  the  indefinite  future. 
In  strict  theory,  the  whole  of  this  increase  might  be  taken 
through  taxation." 

Professor  Bullock  argues  in  a  somewhat  similar  vein. 
He  points  out  that  Henry  George  advocated  seizing  "grad- 
ually the  present  economic  rent  of  land"  or  enough  of  it 
to  defray  all  public  expenditures."^*  He  then  proceeds 
to  insist  upon  the  confiscatory  and  unjust  nature  of  the 
reform."  Following  after  this  he  contends  that  "to  ad- 
just municipal  taxation  in  such  a  manner  as  to  intercept 
a  considerable  part  of  the  future  unearned  increment  from 


^^Ibid.,  p.  I02. 
'*Ibid. 


^*The  Elements  of  Economics,  2d  ed.,  pp.  324,  325. 
"Ibid.  pp.  326-28. 


Vested  Rights  and  Future  Increments       163 

land  would  be  a  safe  and  probably  a  desirable  policy."^* 
But  Professor  Bullock  has  not  left  unconsidered  the  pos- 
sibility that  purchasers  of  land  have  paid,  in  the  purchase 
price,  for  anticipated  future  increases  in  value.  For  he 
goes  on  to  say: 

"The  purchase  price  paid  for  land  in  a  progressive  city 
is  somewhat  greater  than  its  capitalized  present  rental 
value,  since  the  purchaser  can  and  must  pay  more  in  view 
of  the  prospective  increase  of  the  rent.    Some  part  of  the 

future  increase,  therefore,  is  reflected  in  present  capital 
values,  and  should  be  left  to  the  present  owners."" 

But  what  part  of  the  future  increase  is  not  reflected  in 
present  capital  values  ?  Are  present  capital  values  of  land 
arrived  at  in  any  other  way  than  by  discounting  all  an- 
ticipated future  rents?  Does  Professor  Bullock  think 
that  these  rents  are  in  part  discounted  and  in  part  not, 
or  does  he  think  that  the  anticipated  increases  are,  on  the 
average,  less  than  the  realized  increases?  And  if  he 
thinks  the  latter,  for  what  reason?  Or  does  Professor 
Bullock  suppose  that  a  part  of  future  land-value  incre- 
ments is  unanticipated  in  such  a  sense  that  to  establish 
definitely  the  policy  of  taxing  heavily  this  part,  would 
leave  every  purchaser  of  land  perfectly  confident  that 
not  any  of  the  tax  would  fall  upon  him  and  perfectly 
willing,  therefore,  to  pay  as  much  for  the  land  as  if  such 
a  tax  were  not  promised?^* 

^Ibid.  p.  329. 

^Ibid.  p.  329,  footnote. 

'T'erhaps,  however,  Professor  Bullock  supposes  that  there  are  cases 
where  the  rise  of  land  value  is  so  utterly  unexpected  that  no  antici- 
pation of  it,  no  remotest  hope  of  the  possibility  of  it,  has  had  any 
previous  eflPect  on  the  value  of  the  land.  To  plan  for  the  taxation  of 
such  an  entirely  unanticipated  increase  in  land  value  would  pre- 
tumably  have  no  effect  upon  the  salable  value  of  any  land  when  the 


164         The  Taxation  of  Unearned  Incomes 

Except  as  we  suppose  that  landowners,  owners  of  mo- 
nopolies, etc.,   underestimate  the   future  possibilities  of 

policy  was  announced.  But  in  view  of  unanticipated  declines  in 
land  value,  also  such  a  policy  would  presumably  reduce  the  average 
rate  of  return  on  investments  in  land  below  a  "reasonable"  rate. 
And  if,  when  they  buy  land,  people  are  ordinarily  influenced  by 
the  thought  that  there  are  possibilities  of  gain  as  well  as  chances  of 
loss,  then  a  tax  on  such  gain,  if  the  tax  is  to  have  no  least  influence 
on  present  salable  values,  must  be  on  only  such  parts  of  the  gain 
as  have  been  in  no  sense  contemplated  or  considered  by  sellers  or 
purchasers  of  land.  Whether  or  not  a  means  could  be  devised  to 
distinguished  any  such  part  of  any  gain  from  the  rest,  it  will  be  ob- 
vious that  a  tax  on  so  limited  a  value  is,  considered  as  a  source  of 
public  revenue,  unimportant  and,  considered  as  an  engine  of  eco- 
nomic reform,  utterly  futile.  And,  indeed,  if  the  investor  thinks  of 
the  possibility  of  unexpected  gains  as  offsetting  the  possibility  of 
unexpected  declines,  a  foreseen  tax  i  n  the  gains,  with  no  "compensa- 
tion" for  the  declines,  would  certainly  lower  the  salable  value  of  land. 

But  no  matter  if  all  future  land-value  increases  are  considered  as 
subject  to  taxation,  no  matter  how  high  the  rates  of  tax  on  such 
increments  and  not  matter  how  quicky  the  salable  value  of  land 
might  be  affected  and  "vested  rights"  infringed,  in  the  long  run 
the  salable  value  of  land  could  not  be  made  to  fall  as  much  and 
the  opportunities  for  widespread  land  ownership  rendered  as  favor- 
able as  by  gradually  increasing  the  tax  rates  on  land  values  in  gen- 
eral. 

In  passing,  it  may  be  worth  while  to  allude  to  the  contention 
sometimes  made  that  an  "unearned  increment''  is  necessary  to  keep 
farmers  in  their  business.  Then  what  keeps  the  increasing  propor- 
tion of  tenant  farmers  in  the  business?  And  is  it  likewise  necessary 
in  other  lines  to  keep  everyone  in  a  specific  business?  If  no  one 
received  any  "unearned  increment''  would  each  person  leave  his 
business  for  some  other  business  in  which  he  likewise  would  not 
receive  it?  But,  as  we  have  seen,  if  land  values  were  taxed  the 
yield  to  owners  of  land  woulu  be  as  high  a  per  cent,  of  what  their 
land  would  then  sell  for  as  now — a  higher  rate,  perhaps,  because 
of  the  reduction  of  other  taxes. 

After  meeting  this  jbjection,  viz.,  that  farmers  must  have  an 
unearned  increment,  it  seems  curious  to  find  some  economists,  who 


;>^  Alf 


t 


Vested  Rights  and  Future  Increments       165 

income  from  their  property— and  they  are,  perhaps,  as 
likely  to  overestimate— there  is  certainly  no  possibility 
of  ever  giving  the  non-landowning  and  non-monopoly- 
owning  public  anything  whatever,  even  through  purchase, 
without  trenching  on  the  "vested  rights"  of  the  owners.'^* 

apparently  do  not  venture  to  support  generally  increased  land-value 
taxation,  demanding  that  railroads  shall  be  prevented  from  securing 
"unearned  increment"  but  that  the  means  of  prevention  shall  be 
rate  regulation  instead  of  taxation.  It  is  p  ooosed  that  railroad 
rates  shall  be  regulated  on  the  basis  of  original  cost  of  plant  with- 
out regard  to  what  the  land  necessary  would  now  cost.  But  there 
arc  a  number  of  serious  objections  to  such  a  proposal.  In  the  first 
place,  if  we  say,  in  effect,  to  landowners,  that  they  have  a  chance 
at  an  unearned  increment  provided  they  use  their  land  in  any  other 
way  but  no  chance  for  it  if  they  use  it  for  railroads— or  that  rail- 
roads which  purchase  land  cannot  have  the  same  chance  as  other 
purchasers— then  the  tendency  is  to  discourage  railroad  construc- 
tion as  compared  with  other  uses  of  land.  In  the  second  place,  if 
two  railroad  lines  are  built  through  a  given  territory,  one  at  a  later 
date  than  the  other  and  paying  a  higher  price  for  its  land,  such  a 
system  of  rate  regulation  would  tend  to  justify  higher  rates  on  the 
second-built  railroad  than  on  the  first,  with  consequent  discrimina- 
tion in  favor  of  the  shippers  on  the  first-constructed  road.  And  no 
system  of  taking  from  successful  railroads  a  part  of  their  increased 
returns  from  superior  efficiency  can  possibly  be  as  satisfactory  as  a 
system  of  taxing  them  and  all  other  persons  and  corporations  on 
their  economic  rent  (potential  rent  in  the  ease  of  unused  land)  or 
land  value.  (For  a  fuller  discussion  of  this  problem  see  the  au- 
thor's review,  "Sharfman's  American  Railro  Problem"  in  the 
Quarterly  Journal  of  Economics,  February,  1922,  pp.  323-^^4,  and 
relevant  passages  in  the  author's  book  on  "Transportation  Rates 
and  Their  Regulation,"  New  York — Macmillan — igK  ^ 

"We  are  here  supposing  that  the  property  owners  in  question  have 
bought  their  property  in  the  confidence  that  public  policy  would  not 
change.  If  they  have  paid  less  because  of  the  expectation  of  change, 
does  such  change  trench  on  their  "vested  rights"? 

Possibly  the  statement  above  in  the  text  should  be  qualified.  Be- 
sides the  direct  loss  to  consumers  of  monopoly  goods  from  extortionate 


w 


166 


The  Taxation  of  Unearned  Incomes 


The  landless  must  continue  to  pay  owners  for  the  privilege 
of  living  on  or  working  on  their  land  or  they  must  pay 
the  owners,  in  advance,  not  only  the  capitalize<i  value 
of  the  present  rent  but  the  capitalized  value  of  any  future 
increases  in  the  rent  which  the  owners  may  have  a  reason- 
able prospect  of  being  able  to  charge.*"  Similarly,  consum- 
ers must  continue  to  pay  monopoly  prices  to  the  owners 
of  monopolies  or  else  they  must  pay  such  owners,  in  ad- 
vance, the  capitalized  value  not  of  the  present  monopoly 
profits  only  but,  if  increased  prices  may  be  looked  for  in 
the  future,  of  the  estimated  additional  future  profits  also. 
Why  must  professional  economists  continually  try  to 
evade  the  issue,  insisting  at  one  moment  that  vested 
rights — which  are  merely  rights  to  expected  future  in- 
come— must  be  respected,  and  in  the  next  moment  discuss- 
ing sympathetically  the  proposition  to  take  a  part  of  such 
expected  future  income  for  the  public  ?®^  Is  economic  sci- 

prlces,  there  is  also  the  disadvantage  to  persons  who  are  prevented 
by  these  prices  from  buying  the  monopolized  goods  and  who  so 
contribute  nothing  to  the  monopoly  gains,  i.  e.,  who  are  injured  but 
not  exactly  exploited.  If  there  is  any  advantage  at  all  to  the  public 
in  so  buying  out  a  monopoly  it  can  only  lie  in  the  termination  of  this 
incidental  disadvantage  or  injury.  Does  speculative  holding  of  land 
thus  similarly  injure  even  where  there  is  no  direct  exploitation?  But 
economists  who  say  that  speculative  holding  is  no  especial  evil  and 
those  who  say  that  it  docs  good  are  not  the  ones  to  argue  that  the 
public  would  derive  even  any  incidental  advantage  from  buying  out 
the  owners  of  land. 

**It  may  be  of  passing  interest  to  a  very  few  readers  to  note  that 
this  point,  although  apparently  o  erlooked  by  most  current  writert 
of  economics  texts,  was  clearly  understood  by  Henry  George.  Se« 
his  book.  The  Science  of  Political  Economy,  New  York  (Doubleday 
and  McClure  Co.),  1898,  p.  195. 

Professor  T.  S.  Adams  is  both  more  consistent  and  more  con- 
servative.    He  seems  very  clearly  to  go  the  whole  way  and  to  bt 


M 


T 


Vested  Rights  and  Future  Increments       167 

ence  now  where  the  physical  sciences  v/cre  before  the  days 
of  Newton,  Kepler,  Galileo,  et  al.f 

A  heavy  tax  on  future  increase  of  value  may  infringe 
upon  "vested  rights"  as  much  as  or  more  than  a  gradual 
increase  of  taxation  on  land  values  in  general.  But  if  we 
are  primarily  interested  in  building  the  best  possible  fu- 
ture society,  we  shall  prefer  the  latter.  For  however 
greatly  "vested  rights"  may  be  infringed  upon  by  an  in- 
crement tax,  in  the  long  run  the  salable  value  of  land 
cannot  be  made  to  fall  as  much  and  the  opportunities  of 
the  ambitious  poor  to  get  started  in  life  cannot  be  made 
as  favorable  by  such  a  tax  as  by  a  gradually  increasing 
tax  on  the  entire  salable  or  rental  value  of  land. 

But  scarcely  any  least  glimmering  of  light  on  the  real 
and  important  advantages  of  increased  land-value  taxation 
shines  through  the  dark  smoke-screen  of  confused  reason- 
ing with  which,  however  unconsciously  and  unintentional- 
ly, the  majority  of  writers  on  public  finance  have  sur- 
rounded this  subject.  And  so  what  the  historian, 
Buckle,"  remarked  as  being  frequently  true  of  the  so- 
called  educated,  can  perhaps  be  fairly  asserted  of  many 
present-day  students  of  economics  who,  ambitious  to  un- 
derstand the  economic  laws  of  taxation  and  the  effects  of 
taxation  on  human  welfare,  have  sought  aid  from  the 
standard  text  books  on  public  finance,  viz.,  that  the  pro- 
gress of  their  knowledge  "has  been  actually  retarded  by 

definitely  opposed  to  the  taxing  even  of  future  increases  of  land 
value  as  unfair  to  "the  man  who  has  purchased  land  at  a  price  or 
value  determined  by  capitalizing  unearned  increment."  Sec  his 
article,  "Tax  Exemption  Through  Tax  Capitalization,"  American 
Economic  Revieta,  June,  1916,  p.  281. 

"Henry  Thomas  Buckle,  The  History  of  Civilization  in  England, 
reprinted  from  the  second  London  edition,  New  York  (Appleton), 
1894,  Vol.  I,  p.  195. 


r 


168 


The  Taxation  of  Unearned  Incomes 


yj 


the  activity  of  their  education",  that  they  are  "bu-dened 
by  prejudices,  which  their  reading,  instead  of  dissipating, 
has  rendered  more  inveterate",  that  their  "erudition  min- 
isters to  their  ignorance"  and  that  ''the  more  they  read, 
the  less  they  know.' 


§9 


Summary 

In  concUiding  our  brief  and  somewhat  limited  review 
of  the  opinions  of  certain  professional  economists  on  the 
taxation  of  land  values,,  we  may,  perhaps  with  advantage, 
glance  back  at  some  of  our  discoveries.    We  have  found 
the  claim  set  up,  by  very  clear  implication,  that  to  tax 
pure  land  rent  rather  than  improvements  would  discour- 
age thrift  and  improvements  more  than  1o  tax  land  and 
improvements  together  at  a  lower  rate  on  their  combined 
value.    We  have  noted  the  assertion,  by  a  widely  known 
economist  and  taxation  adviser,  that  the  unearned  in- 
crement is  "diffused,"  in  large  part,  through  generally 
reduced  rents,  prices  and  railway  rates.     We  have  met 
with  the  claim,  from  the  writings  of  a  specialist  on  taxa- 
tion, that  bare-land  values  and  improvement  values  cannot 
be  distinguished  because  "it  is  quite  impossible"  to  do 
it  and  because  "no  attempt  is  ever  made"  to  do  it,  and 
from  the  writings  of  both  this  specialist  and  two  others, 
that  there  is  not  much  distinction,  anyway,  between  gifts 
of  nature  and  products  of  lal)or.    We  have  met  with  the 
claim  that  the  single  tax  (the  impot  unique)  was  "aban- 
doned" in  France,  because  of  its  "injustice,"  although  it 
was  never  tried  in  France.    We  have  examined  the  con- 
tention that  additional  taxation  of  land  values  would  be 


^ 


\ 


Summary 


169 


unjust,  but  have  found  other  "vested  rights"  receiving, 
usually,  less  sympathetic  consideration  from  professional 
economists.  Finally,  we  have  found  that  economists  who 
are  well  known  among  their  fellows  in  the  craft  are  ca- 
pable of  both  opposing  increased  general  taxation  of  land 
values  as  infringing  on  vested  rights  and,  simultaneously, 
favoring  special  taxation  of  future  land-valu^  increments 
as  not  infringing  on  such  rights.  What  arguments  will 
be  next  concocted  by  those  conservative  professional  econ- 
omists who  are  determined,  at  all  costs,  to  oppose  in- 
creased general  land-value  taxation? 


From  a  Recent  Review  by  Henry  Raymond  Mussey 

in  The  Nation. 

It  was  full  time  for  some  competently  equipped  economist  to  take 
up  the  cudgels  in  behalf  of  the  economically  tenable  parts  of  Henry 
George's  doctrine.  Mr.  Brown  has  done  it  with  zeal,  and  on  the 
whole  with  skill.  Of  course  this  puts  him  outside  the  fold  of  the 
safe  and  sane  economists,  and  the  vigor  of  his  onslaught  has  already 
occasioned  some  little  fluttering  in  the  academic  dove-cotes.  But 
say  what  we  may,  land  does  diflFer  significantly,  for  purposes  of 
economic  analysis,  from  factories  and  railroad  trains  and  other 
things  that  men  make.  The  true  economic  scientist,  then,  if  he  ia 
going  to  devise  tax  systems,  must  take  account  of  those  differences, 
and  not  simply  foam  at  the  mouth  every  time  the  single  tax  ia 
mentioned. 


\ 


>  < 


'\ 


Economic  Science  and  the  Common  Welfare 
by  the  same  author. 

"Part  I  is  t  highly  realistic  description  of  the  price  system  and 
gives  the  beginner  the  difficult  but  important  concept  of  the  general 
price  level  and  the  relations  of  banking,  business  cycles,  prosperity, 
depressions,    monopoly,    competition    and    tariffs.     .     .     . 

"He  shows  that  this  'opportunity -cost'  of  production  influences 
demand  no  less  than  supply  and  applies  it  throughout  to  interest, 
wages  and  the  rent  of  land.     .     .     . 

"Professor  Brown's  most  significant  use  of  the  concept  of  oppor- 
tunity cost  is  in  the  treatment  of  rent.  .  .  .His  method  of 
analysis  at  this  point  is  quite  superior  to  that  of  Ricardo  and  Henry 
George,  since  it  makes  scarcity  the  central  feature,  and  not  the  re- 
duction of  efficiency  at  the  agricultural  margin  of  cultivation.  I 
believe  it  places  the  argument  for  special  taxation  of  bare-land 
values  on  stronger  and  better  grounds  than  those  that  have  hitherto 
been  offered  by  the  followers  of  the  Ricardian  analysis." 

— Professor  John  R.  Commons 

in  The  American  Economic  Review. 

"The   author's  discussion  of  'vested  rights'    .    .    .     deserves   at- 
tention." — Political  Science  Quarterly. 


"Like  a  breath  of  fresh  air  in  the  musty  realm  of  economics  and 
sociology."  —Duluth  Herald. 


The  Taxation  of  Unearned  Incomes $  2  oo 

Economic  Science  and  the  Common  Welfare ••.«.-.....     3  00 

Copies  of  this  essay,  25  cents;   Per  hundred    1700 

Per  thousand    $15000 


LUCAS  BROTHERS 
Columbia,  Mo. 


S/     I  ' 


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